An Empirical Model of Wage Indexation Provisions in Union Contracts
Cost of living escalators are an important feature of North American labor contracts. This paper presents a measure of the response of index-linked wage increases to concurrent price increases for a sample of Canadian contracts, and then analyses this response in terms of a simple model of indexation to the aggregate price level. The model highlights the importance of aggregate price movements in conveying information about industry-specific prices. The empirical analysis confirms that industry-specific correlations between input and output prices and the Consumer Price Index are important determinants of the response of wage to prices across index contracts.
|Date of creation:||Jun 1984|
|Date of revision:|
|Publication status:||published as Card, David. "An Empirical Model of Wage Indexation Provisions in Union Contracts." Journal of Political Economy, Vol. 94, No. 3, Part 2, pp. S144-S 175, June 1986.|
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- Orley Ashenfelter & James N. Brown, 1985.
"Testing the Efficiency of Employment Contracts,"
573, Princeton University, Department of Economics, Industrial Relations Section..
- Daniel S. Hamermesh, 1976. "Econometric Studies of Labor Demand and Their Application to Policy Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 507-525.
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- James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean, 1979. "Wage Indexing Rules and the Behavior of the Economy," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 798-815, August.
- Ehrenberg, Ronald G & Danziger, Leif & San, Gee, 1983. "Cost-of-Living Adjustment Clauses in Union Contracts: A Summary of Results," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 215-45, July.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
- David Card, 1983. "Cost-of-living escalators in major union contracts," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(1), pages 34-48, October.
- Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
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