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Inflexible Wages and Prices? Evidence in the Current Recession

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  • William C Dunkelberg
  • Jonathan A Scott
  • Michael J Chow

Abstract

The 2008/9 recession period brought the most massive and quickest response of fiscal and monetary policy in modern economic history. At the same time, small businesses (that produce half of private GDP) exhibited the most rapid adjustments in wages, prices, and inventories recorded in the past 35 years of data collected by the National Federation of Independent Business. The notion of “sticky” wages and prices plays a key role in arguments favoring government intervention to rebalance supply and demand for labor and output. The faster wages and prices (and therefore employment and output) adjust to a “shock” to the economy, the less the need for government intervention.

Suggested Citation

  • William C Dunkelberg & Jonathan A Scott & Michael J Chow, 2010. "Inflexible Wages and Prices? Evidence in the Current Recession," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 45(2), pages 94-101, April.
    • Handle: RePEc:pal:buseco:v:45:y:2010:i:2:p:94-101
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    Cited by:

    1. Michael J Chow & William C Dunkelberg, 2011. "The Small Business Sector in Recent Recoveries," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 46(4), pages 214-228, October.

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