International Adjustment with Wage Rigidity
In: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics
Two of the puzzling macroeconomic phenomena of the 1970s have been the persistent stagnation in Europe, and the disagreement between the U.S. and Europe on the feasibility of recovery by demand expansion. This paper develops the hypothesis that the source of both the stagnation and the policy differences is money-wage stickiness in the U.S. and real-wage stickiness in Europe and Japan. A real wage which is sticky above its equilibrium level in Europe and Japan would account for stagnation and infeasibility of recovery by demand expansion. The theoretical models are developed in both the one-commodity and two-commodity-bundle cases. The empirical results confirm that in the U.S. the nominal wage adjusts slowly toward equilibrium, while in Germany, Italy, Japan, and the U.K. the real wage adjusts slowly.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
11675.||Handle:|| RePEc:nbr:nberch:11675||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Avinash Dixit, 1978. "The Balance of Trade in a Model of Temporary Equilibrium with Rationing," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 393-404.
- Branson, William H & Klevorick, Alvin K, 1969. "Money Illusion and the Aggregate Consumption Function," American Economic Review, American Economic Association, vol. 59(5), pages 832-49, December.
- Michael Bruno & Jeffrey Sachs, 1979. "Supply vs. Demand Approaches to the Problem of Stagflation," NBER Working Papers 0382, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:11675. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.