IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/9.html
   My bibliography  Save this paper

Real wages, inflation and unemployment

Author

Listed:
  • Palle S. Andersen

Abstract

This paper summarises the main features of an expectations-augmented Phillips curve with accompanying mark-up price equations. The empirical counterparts for six countries are presented. Even though preliminary, the results are relatively satisfactory in terms of statistical fit and a priori expectations with respect to the sign and size of the parameters. However, in periods when both inflation and unemployment have increased far above historical trends, it is somewhat unsatisfactory to assume that the level of unemployment is exogenous and independent of the inflation process. Moreover, considering the simultaneous changes in relative prices and real wages, there would seem to be some merit in incorporating these variables – directly and indirectly – in the wage formation process.

Suggested Citation

  • Palle S. Andersen, 1984. "Real wages, inflation and unemployment," BIS Working Papers 9, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:9
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/work9.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: http://www.bis.org/publ/work9.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pitchford, J. D., 1981. "A consistent model of the expectations augmented Phillips curve and inflation," Journal of Macroeconomics, Elsevier, vol. 3(4), pages 489-499.
    2. Malinvaud, Edmond, 1982. "Wages and Unemployment," Economic Journal, Royal Economic Society, vol. 92(365), pages 1-12, March.
    3. Ormerod, Paul, 1982. "Rational and Non-Rational Expectations of Inflation in Wage Equations for the United Kingdom," Economica, London School of Economics and Political Science, vol. 49(196), pages 375-387, November.
    4. Wadhwani, Sushil B, 1985. "Wage Inflation in the United Kingdom," Economica, London School of Economics and Political Science, vol. 52(206), pages 195-207, May.
    5. Rosen, Harvey S & Quandt, Richard E, 1978. "Estimation of a Disequilibrium Aggregate Labor Market," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 371-379, August.
    6. William H. Branson & Julio J. Rotemberg, 1991. "International Adjustment with Wage Rigidity," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 13-44, National Bureau of Economic Research, Inc.
    7. Morley, R, 1979. "Profit, Relative Prices and Unemployment," Economic Journal, Royal Economic Society, vol. 89(355), pages 582-600, September.
    8. George L. Perry, 1983. "What Have We Learned about Disinflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 587-602.
    9. Roth, Jürgen, 1982. "Mehr Beschäftigung durch Reallohnzurückhaltung: Zum Streit zwischen kosten- und nachfrageorientierter Lohnpolitik," Kiel Discussion Papers 85, Kiel Institute for the World Economy (IfW Kiel).
    10. Taylor, Jim & Cunningham, Jim, 1982. "Profit, Relative Prices and Unemployment: A Comment," Economic Journal, Royal Economic Society, vol. 92(365), pages 161-169, March.
    11. Morley, R, 1982. "Profit, Relative Prices and Unemployment: A Reply," Economic Journal, Royal Economic Society, vol. 92(365), pages 170-173, March.
    12. Agarwala, R, et al, 1972. "A Neo-classical Approach to the Determination of Prices and Wages," Economica, London School of Economics and Political Science, vol. 39(155), pages 250-263, August.
    13. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, vol. 21(1-2), pages 11-39.
    14. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January.
    15. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
    16. Hickman, Bert G & Klein, Lawrence R, 1984. "Wage-Price Behavior in the National Models of Project LINK," American Economic Review, American Economic Association, vol. 74(2), pages 150-154, May.
    17. Jeffrey D. Sachs, 1983. "Real Wages and Unemployment in the OECD Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 255-304.
    18. McCallum, B T, 1974. "Wage Rate Changes and the Excess Demand for Labour: An Alternative Formulation," Economica, London School of Economics and Political Science, vol. 41(163), pages 269-277, August.
    19. Kahn, George A, 1984. "International Differences in Wage Behavior: Real, Nominal, or Exaggerated?," American Economic Review, American Economic Association, vol. 74(2), pages 155-159, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coe, David T, 1985. "Nominal Wages, the Nairu and Wage Flexibility," MPRA Paper 114295, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael C. Burda, 2001. "European Labour Markets and the Euro: How Much Flexibility Do We Really Need?," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 7, pages 252-282, Palgrave Macmillan.
    2. Coe, David T, 1985. "Nominal Wages, the Nairu and Wage Flexibility," MPRA Paper 114295, University Library of Munich, Germany.
    3. Giersch, Herbert & Wolter, Frank, 1982. "On the recent slowdown in productivity growth in advanced economies," Kiel Working Papers 148, Kiel Institute for the World Economy (IfW Kiel).
    4. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January.
    5. Campbell, Carl III, 1995. "A cross-industry time-series analysis of quits," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 53-72.
    6. Jeffrey Sachs, 1986. "High Unemployment in Europe: Diagnosis and Policy Implications," NBER Working Papers 1830, National Bureau of Economic Research, Inc.
    7. Bela Balassa, 1984. "The economic consequences of social policies in the industrial countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(2), pages 213-227, June.
    8. LAL, Deepak & van Wijnbergen, Sweder, 1985. "Government deficits, the real interest rate and LDC debt : On global crowding out," European Economic Review, Elsevier, vol. 29(2), pages 157-191.
    9. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2023. "Nominal and real wages in the UK, 1750–2015: mean reversion, persistence and structural breaks," SN Business & Economics, Springer, vol. 3(8), pages 1-10, August.
    10. Aurélien Goutsmedt & Matthieu Renault & Francesco Sergi, 2021. "European Economics and the Early Years of the International Seminar on Macroeconomics," Revue d'économie politique, Dalloz, vol. 131(4), pages 693-722.
    11. Franz, Wolfgang & Gordon, Robert J., 1993. "German and American wage and price dynamics : Differences and common themes," European Economic Review, Elsevier, vol. 37(4), pages 719-754, May.
    12. Jaime R. Marquez & Paul Pauly, 1984. "Cooperative policies among the North, the South, and OPEC : an optimal control approach," International Finance Discussion Papers 247, Board of Governors of the Federal Reserve System (U.S.).
    13. Robert J. Gordon, 1996. "Macroeconomic Policy in the Presence of Structural Maladjustment," NBER Working Papers 5739, National Bureau of Economic Research, Inc.
    14. Obstfeld, Maurice, 1982. "Relative Prices, Employment, and the Exchange Rate in an Economy with Foresight," Econometrica, Econometric Society, vol. 50(5), pages 1219-1242, September.
    15. John C. P. McCallum, 1986. "Two Cheers for the Anti-Inflation Board," Canadian Public Policy, University of Toronto Press, vol. 12(1), pages 133-147, March.
    16. Junankar, Pramod N. (Raja) & Madsen, Jakob B., 2004. "Unemployment in the OECD: Models and Mysteries," IZA Discussion Papers 1168, Institute of Labor Economics (IZA).
    17. Blinder, Alan S. & Mankiw, N. Gregory, 1984. "Aggregation and stabilization policy in a multi-contract economy," Journal of Monetary Economics, Elsevier, vol. 13(1), pages 67-86, January.
    18. Bottazzi, Laura & Pesenti, Paolo & van Wincoop, Eric, 1996. "Wages, profits and the international portfolio puzzle," European Economic Review, Elsevier, vol. 40(2), pages 219-254, February.
    19. Robert J. Gordon & John Veitch, 1986. "Fixed Investment in the American Business Cycle, 1919-83," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 267-358, National Bureau of Economic Research, Inc.
    20. Aurélien Goutsmedt & Matthieu Renault, Francesco Sergi, 2019. "European Economics and the Early Years of the “International Seminar on Macroeconomicsâ€," Working Papers, Department of Economics 2019_50, University of São Paulo (FEA-USP).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Beslmeisl (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.