A recent literature has used surveys of those who set wages to learn about the sources of sticky
wages. Methodologically, we overcome many of the objections that have been raised against this
work. Substantively, we report a number of unique results. First, the reasons for wage rigidity
differ significantly between large and small firms, and between the high- and low-end of the labor
market. Second, money illusion is a widespread phenomenon. Third, we report significant
interaction effects between sources of wage rigidity: efficiency wage mechanisms involving
reciprocity and voluntary turnover reinforce rigidities due to worker bargaining power, and unions
reinforce rigidities due to external pay comparisons. Finally, there appears to be important gender
differences in pay bargaining and work moral. |
