Comment on L. Calmfors and H. Horn, “Classical Unemployment, Accommodation Policies and the Adjustment of Real Wages”

  • Lars Jonung
  • Richard Layard

Abstract

The aim of this paper is to develop a framework for analyzing the causes of stagflation in an economy with centralized wage setting by a nationwide monopoly union. A basic conclusion is that in such an institutional setting, a full employment policy which accommodates wage disturbances may cause reduction of employment in the private sector and deterioration of the government budget. The model also predicts that the policy has consequences for the allocation of resources between the private and public sector. In fact, the authors develop implicitly a model of long–run public sector growth arising from accommodation policy.

Keywords

Real Wage Centralise Union Government Behavior Bretton Wood System Popularity Function 
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Copyright information

© The Scandinavian Journal of Economics 1986

Authors and Affiliations

  • Lars Jonung
    • 1
  • Richard Layard
    • 2
  1. 1.University of LundSweden
  2. 2.London School of EconomicsLondonEngland

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