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Inflation And The Dispersion Of Real Wages

  • Alok Kumar

The article studies the effects of inflation on real wage dispersion in a search-monetary framework. The economy is characterized by frictions in both the goods and the labor markets. In the goods market, buyers and sellers bargain over prices, whereas in the labor market firms post wage offers. In equilibrium, a lower inflation rate increases the dispersion of real wages. This result is consistent with both the observed trends in wage dispersion and the inflation rate witnessed in the 1980s and the 1990s in the United States and the empirical literature linking reduced inflation to greater wage dispersion. Copyright ©2008 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2008.00484.x
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 49 (2008)
Issue (Month): 2 (05)
Pages: 377-399

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Handle: RePEc:ier:iecrev:v:49:y:2008:i:2:p:377-399
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  23. Nielsen, M.S. & Rosholm, M., 1999. "Wages, Training, and Job Turnover in a Search-Matching Model," Papers 99-03, Centre for Labour Market and Social Research, Danmark-.
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