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- Title
THE PRODUCTIVITY-INFLATION NEXUS IN CANADA, 1963-1979.
- Authors
Jarrett, J. Peter; Selody, Jack G.
- Abstract
Why increases in price inflation can conversely have a negative effect on productivity growth has been the center of discussion among the economist theorists for a long time. In this article authors examine the time series relationship between productivity growth and inflation focusing on a similar case in Canada. This examination is based on the hypothesis that an increase in productivity growth leads to a unit proportional reduction in inflation, or whether the response might be more than one-for-one because of a feedback relationship. Many economists have suggested a negative correlation between productivity growth and industry price inflation. There are a number of ways in which an increased rate of inflation may adversely affect productivity growth. Inflation may affect the desire or ability of labor to do productive work, it may effect labor productivity by causing an inefficient mix of factor inputs. Increasing uncertainty about inflation can decrease productivity by inducing firms to increase their inventories of unproductive buffer stocks and to reduce their expenditures on long-term basic research.
- Subjects
CANADA; INDUSTRIAL productivity; MACROECONOMICS; LABOR; PRICE inflation; PRODUCTION (Economic theory); STATISTICAL correlation; CANADIAN economy, 1945-; LABOR productivity; FACTORS of production; UNITED States economy, 1945-
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p361
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925933