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The Degree of Indexation in Major U.S. Union Contracts

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  • Roger T. Kaufman
  • Geoffrey Woglom

Abstract

The authors propose that the most appropriate measure of the degree of indexation in a union contract is the marginal elasticity of the average expected wage during the life of the contract with respect to unanticipated changes in the price level. They present estimates of this elasticity for 68 U.S. contracts negotiated between 1971 and 1983 with cost-of-living escalators. The average degree of indexation in the sample, .48, is considerably smaller than previous estimates of similar marginal elasticities because the estimation method more accurately incorporates caps, minimum COLAs, and the exact specification of the COLA clauses.

Suggested Citation

  • Roger T. Kaufman & Geoffrey Woglom, 1986. "The Degree of Indexation in Major U.S. Union Contracts," ILR Review, Cornell University, ILR School, vol. 39(3), pages 439-448, April.
    • Handle: RePEc:sae:ilrrev:v:39:y:1986:i:3:p:439-448
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    Cited by:

    1. Graham, Liam & Snower, Dennis J., 2013. "Hyperbolic Discounting And Positive Optimal Inflation," Macroeconomic Dynamics, Cambridge University Press, vol. 17(3), pages 591-620, April.
    2. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    3. Esteban Jadresic, 2002. "The Macroeconomic COnsequences of Wage Indexation Revisited," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.),Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 8, pages 207-258, Central Bank of Chile.
    4. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 427-448, March.
    5. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2‐3), pages 427-448, March.
    6. Mr. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," IMF Working Papers 1998/015, International Monetary Fund.
    7. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," Working Papers Central Bank of Chile 35, Central Bank of Chile.
    8. Liam Graham & Dennis Snower, 2011. "Hyperbolic Discounting and Positive Optimal Inflation," CESifo Working Paper Series 3464, CESifo.

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