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Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies

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  • Hallett, A.J. Hughes

Abstract

The aggregation of sectoral or regional Phillips curves yields an inflation–unemployment trade-off that is not vertical in the long run if there are mismatches between supply and demand in the regional or sectoral labor markets. This remains true even when the individual Phillips curves are all vertical. This result stems from variations in the slope of the individual short-run Phillips curves, rather than from changes to the equilibrium level of unemployment. It implies a role for the management of the distribution of demand over different sectors or regions, in order to minimize the natural rate of unemployment.

Suggested Citation

  • Hallett, A.J. Hughes, 2000. "Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 4(4), pages 534-546, December.
  • Handle: RePEc:cup:macdyn:v:4:y:2000:i:04:p:534-546_01
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    Cited by:

    1. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2008. "Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 279-300.
    2. Demertzis, Maria & Hughes Hallett, Andrew & Schermer, Nicolien, 2009. "Europeanization or globalization? Transnational wage bargaining and the distribution of activity in European labor markets," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 177-192, August.
    3. Libero Monteforte & Stefano Siviero, 2010. "The economic consequences of euro-area macro-modelling shortcuts," Applied Economics, Taylor & Francis Journals, vol. 42(19), pages 2399-2415.
    4. M. Demertzis & A. Hughes Hallett, 2000. "Wage Inflation and the Distribution of Output Gaps in Europe: Insiders vs. Outsiders," WO Research Memoranda (discontinued) 631, Netherlands Central Bank, Research Department.
    5. Luca Fanelli, 2008. "Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(1), pages 53-66, February.
    6. Acocella, Nicola, 2020. "How to Reform the EU and the EMU," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 325-350.

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