This paper examines the effect of inflation on effort and productivity in a representative agent model. We allow individual effort to be a continuous choice variable, which affects utility negatively and output positively. Our general model shows that the effect of inflation on effort, and hence on productivity, is ambiguous. We present an example where the effect is positive, thus demonstrating that a rise in inflation can have beneficial effects in terms of rising productivity, output and growth.
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Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number
9706.
Length: Date of creation: Oct 1997 Date of revision: Handle: RePEc:ukc:ukcedp:9706
Contact details of provider: Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP Phone: +44 (0)1227 764000 Fax: +44 (0)1227 827850 Web page: http://www.ukc.ac.uk/economics/
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