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Working paper

Downward Nominal Wage Rigidity: Unions’ Merit Or Firms’ Foresight?

This paper investigates the sources of the downward nominal wage rigidity in Russia. The empirical analysis is based on the RLMS-HSE household survey from 2004 to 2013. We show that, in spite of weak labor unions in Russia, the extent of downward nominal wage rigidity is high. Moreover, the probability of a wage freeze is decreasing in rm size and is lower for industries with industry-level tari agreements. Our ndings present empirical evidence that the main source of the downward nominal wage rigidity is not the labor unions, but rms' voluntary decision to prevent wage cuts, which may cause quits of valuable employees and/or a decrease in their eorts