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Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies

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  • Hallett, A.J. Hughes

Abstract

The aggregation of sectoral or regional Phillips curves yields aninflation unemployment trade-off that is not vertical in the longrun if there are mismatches between supply and demand in the regionalor sectoral labor markets. This remains true even when theindividual Phillips curves are all vertical. This result stems fromvariations in the slope of the individual short-run Phillips curves, rather than from changes to the equilibrium level of unemployment.It implies a role for the management of the distribution of demandover different sectors or regions, in order to minimize the naturalrate of unemployment.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 4 (2000)
Issue (Month): 04 (December)
Pages: 534-546

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Handle: RePEc:cup:macdyn:v:4:y:2000:i:04:p:534-546_01

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Cited by:
  1. Maria Demertzis & Andrew Hughes Hallett & Nicolien Schermer, 2008. "Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor Markets," DNB Working Papers 186, Netherlands Central Bank, Research Department.
  2. Marika Karanassou & Hector Sala & Dennis Snower, 2007. "Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy," Kiel Working Papers 1326, Kiel Institute for the World Economy.
  3. M. Demertzis & A.J. Huges Hallett, 2001. "Wage Inflation and the Distribution of Output Gaps in Europe: Insidersvs. Outsiders," DNB Staff Reports (discontinued) 59, Netherlands Central Bank.
  4. Andrea Vaona, 2006. "Merging the Purchasing Power: Parity and the Phillips Curve Literatures: Regional Evidence from Italy," Kiel Working Papers 1282, Kiel Institute for the World Economy.
  5. Fanelli, Luca, 2005. "Testing the New Keynesian Phillips curve through Vector Autoregressive models: Results from the Euro area," MPRA Paper 1617, University Library of Munich, Germany, revised Jan 2007.

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