Some Evidence on the Importance of Sticky Wages

Abstract

We present evidence on the frequency of nominal wage adjustment using SIPP data adjusted for measurement error. The SIPP is a representative sample of the US population. Our main results are: (i) The average quarterly probability of a nominal wage change is between 21.1 and 26.6 percent, depending on the assumptions used. (ii) Wage changes are much more likely when workers change jobs. (iii) The frequency of wage adjustment does not display significant seasonal patterns. (iv) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. (JEL E24, E32, E52, J31)