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Real and Money Wage Rates

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  • John T. Dunlop
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    Abstract

    In the General Theory, John Maynard Keynes held money and real wage rates move in opposite directions. In expansion, prices increase faster because of increasing costs and a rise in the proportion of product going to profits. Neoclassical economists held similarly. Money illusion of workers supported their common view. The author's 1938 article rather showed a procyclical pattern, significant to macroeconomic models of the economy. Contemporary literature with new elements of compensation and new measures of wages supports a slightly procyclical relationship. Increased output and employment in expansion do not require lower real wages.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.2.223
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 12 (1998)
    Issue (Month): 2 (Spring)
    Pages: 223-234

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    Handle: RePEc:aea:jecper:v:12:y:1998:i:2:p:223-34

    Note: DOI: 10.1257/jep.12.2.223
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    1. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    2. Katharine G. Abraham & James R. Spletzer & Jay C. Stewart, 1998. "Divergent Trends in Alternative Wage Series," NBER Chapters, in: Labor Statistics Measurement Issues, pages 293-325 National Bureau of Economic Research, Inc.
    3. Geary, Patrick T & Kennan, John, 1982. "The Employment-Real Wage Relationship: An International Study," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 854-71, August.
    4. David Romer, 1993. "The New Keynesian Synthesis," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 5-22, Winter.
    5. Alan B. Krueger & Jörn-Steffen Pischke, 1997. "A Statistical Analysis of Crime against Foreigners in Unified Germany," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 182-209.
    6. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
    7. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    8. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
    9. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
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    Cited by:
    1. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.

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