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Wage Indexation And Political Cycles



If the wage indexation rate is chosen discretionarily, a Left hand government lowers it in order to increase the output effects of surprise inflation, while a Right hand government prefers high indexation. These choices magnify the differences between the inflation rates preferred by the two parties. When binding commitments before the signature of the labor contract are possible, both parties prefer a higher wage indexation with respect to the discretionary situation, in order to reduce the inflationary bias.

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  • A. Scorcu, 1996. "Wage Indexation And Political Cycles," Working Papers 256, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:256

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    References listed on IDEAS

    1. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 22(2), pages 102-103, April.
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    6. Ulrich Witt, 2006. "Evolutionary Economics," Papers on Economics and Evolution 2006-05, Philipps University Marburg, Department of Geography.
    7. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    8. Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
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