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Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964‐74

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  • P. K. TRIVEDI
  • J. RAYNER

Abstract

This paper attempts to explain the determination of average award wage changes without assuming that the outcome of certain strategic wage settlements is known. Models which allow for habit‐inertia and comparison effects are constructed. It is argued that the main impact of these factors is on the specification and interpretation of lagged adjustment of wages to changes in its determinants. These models are empirically tested using the pre‐indexation quarterly data. An analysis of 1973‐74 wage experience is also provided.

Suggested Citation

  • P. K. Trivedi & J. Rayner, 1978. "Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964‐74," The Economic Record, The Economic Society of Australia, vol. 54(2), pages 195-218, August.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:2:p:195-218
    DOI: 10.1111/j.1475-4932.1978.tb00330.x
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    References listed on IDEAS

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    1. R. O. Hieser, 1970. "Wage Determination with Bilateral Monopoly in the Labour Market: A Theoretical Treatment," The Economic Record, The Economic Society of Australia, vol. 46(1), pages 55-72, March.
    2. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    3. E. A. Boehm, 1974. "Distortions in Relative Wages: The Inflationary Consequences and Policy Implications," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 7(4), pages 39-50, December.
    4. Arthur M. Okun, 1975. "Inflation: Its Mechanics and Welfare Costs," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 351-402.
    5. Manning, R & Richardson, S & Webb, L Roy, 1972. "Market Forces and the Principle of Comparative Wage Justice: Discord or Harmony?," Australian Economic Papers, Wiley Blackwell, vol. 11(19), pages 131-144, December.
    6. Desai, Meghnad, 1973. "Growth cycles and inflation in a model of the class struggle," Journal of Economic Theory, Elsevier, vol. 6(6), pages 527-545, December.
    7. John Eatwell & John Llewellyn & Roger Tarling, 1974. "Money Wage Inflation in Industrial Countries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 515-523.
    8. Johnston, J, 1972. "A Model of Wage Determination under Bilateral Monopoly," Economic Journal, Royal Economic Society, vol. 82(327), pages 837-852, September.
    9. repec:bla:ecorec:v:46:y:1970:i:113:p:55-72 is not listed on IDEAS
    10. repec:bla:ecorec:v:47:y:1971:i:119:p:410-17 is not listed on IDEAS
    11. Denise R. Osborn, 1976. "Maximum Likelihood Estimation of Moving Average Processes," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 1, pages 75-87, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Michael G. Kirby, 1981. "An Investigation of the Specification and Stability of the Australian Aggregate Wage Equation," The Economic Record, The Economic Society of Australia, vol. 57(1), pages 35-46, March.
    2. R.M. Simes & C.J. Richardson, 1987. "Wage Determination In Australia," The Economic Record, The Economic Society of Australia, vol. 63(2), pages 144-155, June.
    3. Calvin D. Siebert & Mahmood A. Zaidi, 1984. "The Relation Between Profits and the Rate of Change of Money Wages in Australia," Australian Journal of Management, Australian School of Business, vol. 9(1), pages 121-129, June.
    4. E. A. Boehm, 1984. "Money Wages, Consumer Prices, and Causality in Australia," The Economic Record, The Economic Society of Australia, vol. 60(3), pages 236-251, September.

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