Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies
The aggregation of sectoral or regional Phillips curves yields aninflation unemployment trade-off that is not vertical in the longrun if there are mismatches between supply and demand in the regionalor sectoral labor markets. This remains true even when theindividual Phillips curves are all vertical. This result stems fromvariations 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 demandover different sectors or regions, in order to minimize the naturalrate of unemployment.
Volume (Year): 4 (2000)
Issue (Month): 04 (December)
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