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- Title
Inflation and Labour Market Adjustment.
- Authors
Hamermesh, Daniel S.
- Abstract
Downward nominal and ex ante real-wage rigidity imply that unexpected inflation will raise the variability of relative wage changes. Using data for the United States on manufacturing industries for 1955-81, and on private nonfarm industries for 1965-81, this hypothesis is studied. The dispersion in relative wage changes is reduced by greater price inflation. Most of the reduction is a response to unexpected inflation; expected inflation has little impact on dispersion. These findings hold for sub-periods within the sample, and are robust to different choices of measures of price expectations, including those of the Livingston survey, the Survey Research Center household data, and ARMA forecasts. They stand in striking contrast to the commonly accepted result that price inflation is associated with greater dispersion of relative price changes.
- Subjects
UNITED States; EFFECT of inflation on wages; PRICES
- Publication
Economica, 1986, Vol 53, Issue 209, p63
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554520