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Do rising labor costs trigger higher inflation?

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  • David A. Brauer

Abstract

The evidence that developments in compensation growth lead overall CPI inflation has thus far been inconclusive. This study, however, sheds new light on the relationship between labor costs and price inflation. By breaking down compensation and prices into their various components, the author finds that compensation growth in the service-producing segment of the private sector can help predict prices for a specific group of services.

Suggested Citation

  • David A. Brauer, 1997. "Do rising labor costs trigger higher inflation?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Sep).
    • Handle: RePEc:fip:fednci:y:1997:i:sep:n:v.3no.11
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    References listed on IDEAS

    as
    1. Mehra, Yash P, 1991. "Wage Growth and the Inflation Process: An Empirical Note," American Economic Review, American Economic Association, vol. 81(4), pages 931-937, September.
    2. Cara S. Lown & Robert W. Rich, 1997. "Is there an inflation puzzle?," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Dec), pages 51-77.
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    Cited by:

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    3. Marek Dabrowski, 1999. "Disinflation, Monetary Policy and Fiscal Constraints. Experience of the Countries in Transition," CASE Network Reports 0016, CASE-Center for Social and Economic Research.
    4. Ryan Macdonald & Josip Lesica & Jenny Watt & Rupert Allen, 2025. "Unit labour cost growth, inflation and productivity growth in Canada and the United States," Economic and Social Reports 202500400004e, Statistics Canada, Analytical Studies and Modelling Branch.
    5. Attilio Zanetti, 2007. "Do Wages Lead Inflation? Swiss Evidence," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(1), pages 67-92, March.
    6. C. Alan Garner, 1998. "A closer look at the employment cost index," Economic Review, Federal Reserve Bank of Kansas City, vol. 83(Q III), pages 63-78.
    7. Diego Moccero & Shingo Watanabe & Boris Cournède, 2011. "What Drives Inflation in the Major OECD Economies?," OECD Economics Department Working Papers 854, OECD Publishing.

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