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An Empirical Model of Wage Indexation Provisions in Union Contracts

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David Card

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Abstract

Cost of living escalators are an important feature of North American labor contracts. This paper presents a measure of the response of index-linked wage increases to concurrent price increases for a sample of Canadian contracts, and then analyses this response in terms of a simple model of indexation to the aggregate price level. The model highlights the importance of aggregate price movements in conveying information about industry-specific prices. The empirical analysis confirms that industry-specific correlations between input and output prices and the Consumer Price Index are important determinants of the response of wage to prices across index contracts.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1388.

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Date of creation: Jun 1984
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Handle: RePEc:nbr:nberwo:1388

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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.:
  1. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. David Card, 1983. "Cost-of-living escalators in major union contracts," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 37(1), pages 34-48, October.
  4. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June. [Downloadable!] (restricted)
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  5. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April. [Downloadable!] (restricted)
  6. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 120-137 National Bureau of Economic Research, Inc. [Downloadable!]
  7. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-42, October. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Robert Rich & Joseph Tracy, 2000. "Uncertainty and Labor Contract Durations," NBER Working Papers 7731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. repec:fth:prinin:178 is not listed on IDEAS
  3. Louis Christofides & Amy Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Jean-Marc Tallon & Sujoy Mukerji, 2004. "Ambiguity aversion and the absence of wage indexation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00174562_v1, HAL. [Downloadable!]
    Other versions:
  5. Giuseppe Diana & Pierre-Guillaume Méon, 2005. "Monetary policy in the presence of asymmetric wage indexation," Working Papers DULBEA 05-16.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
    Other versions:
  6. Andre Portela Souza, 2002. "Wage Inequality Changes in Brazil: Market Forces, Macroeconomic Instability and Labor Market Institutions (1981-1997)," Working Papers 0215, Department of Economics, Vanderbilt University. [Downloadable!]
  7. Louis N. Christofides & Thanasis Stengos, 2003. "Wage Rigidity in Canadian Collective Bargaining Agreements ," University of Cyprus Working Papers in Economics 1-2003, University of Cyprus Department of Economics. [Downloadable!]
    Other versions:
  8. George A. Akerlof, 2007. "The Missing Motivation in Macroeconomics," American Economic Review, American Economic Association, vol. 97(1), pages 5-36, March. [Downloadable!]
  9. Alan Carruth & Andrew Oswald, 1984. "Miners' Wages in Post-War Britain: An Application of a Model of Trade Union Behavior," Working Papers 558, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
    Other versions:
  10. Orley Ashenfelter, 1984. "Macroeconomic Analysis and Microeconomic Analyses of Labor Supply," NBER Working Papers 1500, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. James Cover & David Hoose, 2002. "Asymmetric wage indexation," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(1), pages 34-47, March. [Downloadable!] (restricted)
  12. Jayendu Patel & Richard J. Zeckhauser, 1987. "Treasury Bill Futures as Hedges Against Inflation Risk," NBER Working Papers 2322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Oyer, Paul, 2001. "Why Do Firms Use Incentives That Have No Incentive Effects?," Research Papers 1686, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
  14. Louis N. Christofides & Amy Peng, 2007. "Real Wage Chronologies," Working Papers 0707, University of Guelph, Department of Economics. [Downloadable!]
    Other versions:
  15. Christofides, Louis N. & Stengos, Thanasis, 2001. "Nominal Wage Rigidity: Non-Parametric Tests Based on Union Data for Canada," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  16. Louis N. Christofides & Man Tuen Leung, 2002. "Nominal Wage Rigidity in Contract Data: A Parametric Approach," University of Cyprus Working Papers in Economics 0210, University of Cyprus Department of Economics. [Downloadable!]
    Other versions:
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