As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Daniel Kaufmann, Assistant Professor of Applied Macroeconomics at the University of Neuchâtel and Research Fellow at the KOF Swiss Economic Institute, ETH Zurich.

He will present his research entitled Do Sticky Wages Matter? Evidence from Matched Firm-Survey and Register Data, coauthored with Anne Kathrin Funk (KOF Swiss Economic Institute, ETH Zurich).

Abstract: Sticky wages have a long tradition in macroeconomic models because they generate involuntary unemployment and inefficient business cycles. Whether such wage rigidities are inefficient, or rather reflect optimal implicit contracts between workers and firms, remains controversial. This paper analyzes a novel Swiss data set of payroll data reported by firms, matched at the worker level with administrative social security data on income. We find substantial downward nominal wage rigidities: for workers staying at the same firm, the payroll data show few base wage cuts but many zero or small positive base wage changes. While cuts in other wage components are more frequent, sunday/night work compensation and bonus payments contribute on average less than 5\% to the wages received by individual workers and to the overall payroll bill of firms. We then examine whether base wage rigidities have allocative effects using social security data on income. The identification scheme exploits the discontinuity introduced by downward nominal wage rigidities and rests on the assumption that workers with small wage cuts exhibit otherwise similar characteristics as workers with zero wage changes. In addition, we exploit that the Swiss National Bank abandoned a minimum exchange rate policy in January 2015 leading to relevant deflationary pressures that make downward nominal wage rigidities more binding. After the deflation shock, workers with sticky wages in 2014 exhibit a stronger decline in their overall income than workers with flexible wages. This stronger decline in income can be traced back to a higher probability of becoming unemployed.

Before turning to academia, Daniel Kaufmann worked as Senior Economist at the Swiss National Bank. His research focuses on inflation and exchange rate dynamics, the role of different monetary regimes, and nominal frictions. He proposes econometric tools to quantify and deal with measurement error in 19th century inflation data. In addition, he works on measuring the impact of large exchange rate fluctuations on the price- and wage-setting behavior, as well as, labor demand in Switzerland. Finally, he analyzes the effects of exit strategies with large central bank balance sheets.