The Effects of Inflation and Real Wages on Employment
AbstractThis paper considers the effects of inflation on employment. The absence of index-linked loans and the possibility that errors are committed in times of inflation, lead to a higher probability of bankruptcy during inflation. If firms care about bankruptcy, this implies a lower level of employment. Empirical results confirming this are presented, and suggest that higher inflation has substantially contributed to the fall in employment in the United Kingdom. The authors also demonstrate that a negative real-wage elasticity is not robust to changes in specification. Copyright 1987 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 54 (1987)
Issue (Month): 213 (February)
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