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Real and Money Wage Rates

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  • John T. Dunlop

Abstract

In the General Theory, John Maynard Keynes held money and real wage rates move in opposite directions. In expansion, prices increase faster because of increasing costs and a rise in the proportion of product going to profits. Neoclassical economists held similarly. Money illusion of workers supported their common view. The author's 1938 article rather showed a procyclical pattern, significant to macroeconomic models of the economy. Contemporary literature with new elements of compensation and new measures of wages supports a slightly procyclical relationship. Increased output and employment in expansion do not require lower real wages.

Suggested Citation

  • John T. Dunlop, 1998. "Real and Money Wage Rates," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 223-234, Spring.
  • Handle: RePEc:aea:jecper:v:12:y:1998:i:2:p:223-34
    Note: DOI: 10.1257/jep.12.2.223
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.2.223
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    References listed on IDEAS

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    1. James Tobin, 1941. "A Note on the Money Wage Problem," The Quarterly Journal of Economics, Oxford University Press, vol. 55(3), pages 508-516.
    2. Alan B. Krueger & Jörn-Steffen Pischke, 1997. "A Statistical Analysis of Crime against Foreigners in Unified Germany," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 182-209.
    3. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
    4. Katharine G. Abraham & James R. Spletzer & Jay C. Stewart, 1998. "Divergent Trends in Alternative Wage Series," NBER Chapters,in: Labor Statistics Measurement Issues, pages 293-325 National Bureau of Economic Research, Inc.
    5. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
    6. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," Review of Economic Studies, Oxford University Press, vol. 1(3), pages 157-175.
    7. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    8. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    9. John T. Dunlop, 1939. "Price Flexibility and the "Degree of Monopoly"," The Quarterly Journal of Economics, Oxford University Press, vol. 53(4), pages 522-534.
    10. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
    11. Geary, Patrick T & Kennan, John, 1982. "The Employment-Real Wage Relationship: An International Study," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 854-871, August.
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    Cited by:

    1. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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