HOW ARE FIRMS’ WAGES AND PRICES LINKED SURVEY EVIDENCE IN EUROPE

This paper presents new evidence on the patterns of price and wage adjustment inEuropean firms and on the extent of nominal rigidities. It uses a unique dataset collectedthrough a firm-level survey conducted in a broad range of countries and covering varioussectors. Several conclusions are drawn from this evidence. Firms adjust wages lessfrequently than prices: the former tend to remain unchanged for about 15 months onaverage, the latter for around 10 months. The degree of price rigidity varies substantiallyacross sectors and depends strongly on economic features, such as the intensity ofcompetition, the exposure to foreign markets and the share of labour costs in total cost.Instead, country specificities, mostly related to the labour market institutional setting, aremore relevant in characterising the pattern of wage adjustment..