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Wage Relativities and the Natural Range of Unemployment

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Author Info
Bhaskar, V

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Abstract

If workers are concerned about their relative wage, this can give rise to continuum of natural rates of unemployment that are perfect foresight equilibria. These equilibria can be Pareto ranked in the same order as their level of employment. Which equilibrium is reached depends upon expectations in a bootstraps way so that sunspots can induce fluctuations and monetary policy can bring about shifts between equilibria. Due to coordination failures, perfectly rational agents may make systematic forecasting errors even in the absence of intrinsic uncertainty. If a few agents have adaptive expectations, the economy behaves in a Keynesian manner within the natural range, while being classical at its extremes. Copyright 1990 by Royal Economic Society.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 100 (1990)
Issue (Month): 400 (Supplement,)
Pages: 60-66
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Handle: RePEc:ecj:econjl:v:100:y:1990:i:400:p:60-66

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  2. Steinar Holden & Fredrik Wulfsberg, 2007. "How strong is the case for downward real wage rigidity?," Working Papers 07-6, Federal Reserve Bank of Boston. [Downloadable!]
  3. Ernst Fehr & Urs Fischbacher, . "Why Social Preferences Matter - The Impact of Non-Selfish Motives on Competition," IEW - Working Papers iewwp084, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  4. Steinar Holden, 2004. "Wage Formation under Low Inflation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  5. John C. Driscoll & Steinar Holden, 2002. "Coordination, Fair Treatment and Inflation Persistence," NBER Working Papers 9174, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Holden,S. & Driscoll,J.C., 2001. "A note on inflation persistence," Memorandum 09/2001, Oslo University, Department of Economics. [Downloadable!]
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  7. Fregert, Klas, 1999. "Relative wage setting, contracts and unemployment during the deflations of 1920-22 and 1931-34 in Sweden," Working Papers 1999:2, Lund University, Department of Economics, revised 21 Apr 1999. [Downloadable!]
  8. 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. [Downloadable!]
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  9. Jenny Lye & Ian McDonald, 2008. "The Eisner Puzzle, the Unemployment Threshold and the Range of Equilibria," International Advances in Economic Research, Springer, vol. 14(2), pages 125-141, May. [Downloadable!] (restricted)
  10. Ian McDonald, 2008. "Behavioural Macroeconomics And Wage And Price Setting: Developing Some Early Insights Of John Maynard Keynes And Joan Robinson," CAMA Working Papers 2009-11, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  11. Steinar Holden & Fredrik Wulfsberg, 2007. "Are Real Wages Rigid Downwards?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. Patricia Tovar, 2004. "The Effects of Loss Aversion on Trade Policy and the Anti-Trade Bias Puzzle," Econometric Society 2004 North American Summer Meetings 499, Econometric Society. [Downloadable!]
  13. John C. Driscoll & Steinar Holden, 2003. "Inflation persistence and relative contracting," Finance and Economics Discussion Series 2003-29, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  14. 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. [Downloadable!]
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