TY  - JOUR
AU  - Kaur, Supreet
TI  - Nominal Wage Rigidity in Village Labor Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 20770
PY  - 2014
Y2  - December 2014
DO  - 10.3386/w20770
UR  - http://www.nber.org/papers/w20770
L1  - http://www.nber.org/papers/w20770.pdf
N1  - Author contact info:
Supreet Kaur
Department of Economics
University of California, Berkeley
Evans Hall
Berkeley, CA 94720
E-Mail: supreet@berkeley.edu
AB  - This paper tests for downward nominal wage rigidity by examining transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009.  Nominal wages rise in response to positive shocks but do not fall during droughts. In addition, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. This ratcheting effect generates a 9% reduction in employment levels. Inflation enables downward real wage adjustments both during droughts and after positive shocks. Survey evidence suggests that workers and employers believe that nominal wage cuts are unfair and lead to effort reductions.
ER  -