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Inflation, wage bargaining, wage policy and production structure: Theory and empirical results for the Netherlands

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Summary

Starting from traditional neo-classical results, a theory is developed in which, in addition to prices, labour productivity and unemployment, the degree of unionization, the profit rate and the shifting-on of direct taxes and social security contributions influence nominal contract wages. A separate theoretical framework is constructed for wage drift.

It is furthermore shown how the wage theory presented is related to Friedman-Phelps specifications. After a discussion of wage policy and its potential influence on wages, wage equations are estimated for the key bargaining sector as well as for wage followers. After their characteristics have been dealt with, as well as the effects of wage policy and the role of wage drift, the relationship between key bargaining, inflation and employment is analysed, showing that the model presented is able to explain stagflation.

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Authors and Affiliations

  1. University of Amsterdam, The Netherlands

    W. Driehuis (Professor of macro-economics)

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  1. W. Driehuis
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My thanks are due to Mr. H. von Eye for his help in carrying out the calculations and to Mr. A. de Reyger for providing me with the sectoral unionization rates and his general research assistance. Mr. A. J. van Geel kindly prepared the graphs.

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Driehuis, W. Inflation, wage bargaining, wage policy and production structure: Theory and empirical results for the Netherlands. De Economist 123, 638–679 (1975). https://doi.org/10.1007/BF02078323

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