Indexation Rules, Risk Aversion, and Imperfect Information
AbstractNominal wage adjustment is modelled as resulting from bargaining between a risk-neutral firm and a risk-averse worker, in an environment where the rate of inflation is a random variable. Risk aversion makes for endogenous indexation arrangements, which deliver partial indexation as they exploit imperfect inflation indices; moreover, risk aversion generates a positive correlation between indexation and inflation variance. The model suggests a distinction between complete versus incomplete inflation adjustment, on the one hand, and perfect versus imperfect adjustment, on the other. Copyright 2003 Blackwell Publishing Ltd and The Victoria University of Manchester.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 450.
Date of creation: 2002
Date of revision:
Contact details of provider:
Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
Other versions of this item:
- Corrado Benassi & Antonello E. Scorcu, 2003. "Indexation Rules, Risk Aversion and Imperfect Information," Manchester School, University of Manchester, vol. 71(3), pages 330-340, 06.
- NEP-ALL-2006-04-29 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert Rich & Joe Tracy, 2000.
"Uncertainty and labor contract durations,"
106, Federal Reserve Bank of New York.
- Brent R. Moulton, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-177, Fall.
- Ehrenberg, Ronald G & Danziger, Leif & San, Gee, 1983. "Cost-of-Living Adjustment Clauses in Union Contracts: A Summary of Results," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 215-45, July.
- Blanchard, Olivier Jean, 1979. "Wage Indexing Rules and the Behavior of the Economy," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 798-815, August.
- Azariadis, Costas, 1978. "Escalator clauses and the allocation of cyclical risks," Journal of Economic Theory, Elsevier, vol. 18(1), pages 119-155, June.
- Danziger, Leif, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 435-40, May.
- Fischer, Stanley, 1977. "Wage indexation and macroeconomics stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 107-147, January.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- Davis, George & Kanago, Bryce, 1997. "Contract Duration, Inflation Uncertainty, and the Welfare Effects of Inflation," Journal of Macroeconomics, Elsevier, vol. 19(2), pages 237-251, April.
- Holland, A Steven, 1986. "Wage Indexation and the Effect of Inflation Uncertainty on Employment:An Empirical Analysis," American Economic Review, American Economic Association, vol. 76(1), pages 235-43, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luca Miselli).
If references are entirely missing, you can add them using this form.