Skip to main content
SpringerLink
Log in

Nominal wage rate revisions and measured compensation against anticipated inflation

  • Articles
  • Published:
Journal of Labor Research Aims and scope Submit manuscript

Abstract

With discontinuous, front-loaded, revisions in nominal wage rates during wage contracts, compensation against anticipated inflation requires a coefficient α on anticipated inflation in Phillips-type equations α=(2n − 1)/2n, where n is the number of wage revisions. Finite n implies α<1 despite the complete absence of money illusion. In a multiperiod context, conventional equations produce values of α which exceed (fall short of) unity during periods of decelerating (accelerating) inflation — α will approximate unity during constant inflation. A modified Phillips equation is proposed which removes this sample specificity but maintains the dependence of α on n.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Christofides, L. N., “Expected Inflation and the Optimal Number of Nominal Wage Rate Revisions,”Economic Letters, forthcoming.

  • Christofides, L. N., R. Swidinsky, and D. A. Wilton, “A Microeconometric Analysis of the Canadian Wage Determination Process,”Economica, Vol. 47, No. 2, May 1980(a), pp. 165–178.

    Article  Google Scholar 

  • Christofides, L. N., R. Swidinsky and D. A. Wilton, “A Microeconometric Analysis of Spillovers within the Canadian Wage Determination Process,”The Review of Economics and Statistics, Vol. 62, No. 2, May 1980(b), pp. 213–221.

    Article  Google Scholar 

  • Friedman, M., “The Role of Monetary Policy,”American Economic Review, Vol. 57, No. 1, March 1968, pp. 1–17.

    Google Scholar 

  • Oi, W. Y., “On Measuring the Impact of Wage-Price Controls: A Critical Appraisal,”Carnegie-Rochester Conference Series on Public Policy, Vol. 2, 1976, pp. 7–64.

    Article  Google Scholar 

  • Riddell, W. C., “The Empirical Foundations of the Phillips Curve: Evidence from Canadian Contract Data,”Econometrica, Vol. 47, No. 1, January 1979, pp. 1–24.

    Article  Google Scholar 

  • Turnovsky, S. J. and M. L. Wachter, “A Test of the Expectations Hypothesis Using Directly Observed Wage and Price Expectations,”The Review of Economics and Statistics, Vol. 54, No. 1, February 1972, pp. 47–54.

    Article  Google Scholar 

  • Turnovsky, S. J., “The Expectations Hypothesis and the Aggregate Wage Equation: Some Empirical Evidence from Canada,”Economica, N.S. Vol. 39, No. 153, February 1972, pp. 1–17.

    Article  Google Scholar 

  • Vanderkamp, J. “Wage Adjustment, Productivity and Price Change Expectations,”Review of Economic Studies, Vol. 39, No. 117, January 1972, pp. 61–72.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Guelph, N1G 2W1, Guelph, Ontario, Canada

    Louis N. Christofides

Authors
  1. Louis N. Christofides
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

I am indebted to Clive Southey and an anonymous referee for helpful suggestions.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Christofides, L.N. Nominal wage rate revisions and measured compensation against anticipated inflation. Journal of Labor Research 3, 359–365 (1982). https://doi.org/10.1007/BF02685195

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02685195

Keywords

Search

Navigation