Sectoral differences in wage freezes and wage cuts:evidence from a new firm survey

The paper provides evidence concerning incidence and sources of nominal wage rigidity in servicesand manufacturing, using a new and large employer survey on wage and price setting behaviour forGermany. We observe that wage freezes are more frequent in services than in manufacturing, whereaswage cuts are less frequent. The significant sector gaps do not vanish after controlling for relevant firmcharacteristics influencing the incidence of wage freezes and wage cuts, notably coverage bycollective agreements and the degree of price competition on the product market. An analysis of firms’view on the reasons preventing wage cuts suggests that specific fear of excess worker turnover couldexplain distinct wage setting behaviour in services....