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Unemployment pp 88-111 | Cite as

The International Element in the Phillips Curve

  • Martin Paldam

Abstract

A set of internal two-equation price-wage models is formulated for 17 countries. It is then demonstrated that the interconnection is much stronger than can be explained by: (i) imported inflation through import prices including exchange rate changes; (ii) the common element in total demand generated by exports; and (iii) the necessity for competitiveness as formulated in the EFO model. The unweighted average of wage increases in the countries considered is called the ż-variable and is used as a proxy for the unexplained international element. It is demonstrated that the coefficient of ż is remarkably stable over time, across countries and for different estimation techniques. It also appears to be largely unrelated to the trade shares of the countries. Only half of the ż-element is due to common long-term trends. It is often argued that the wage-push elements, i.e. those uncorrelated with labor scarcity, are generated by expectations. We thus conclude that there is a large inter-national element in expectations.

Keywords

Wage Increase Wage Level Import Price Wage Equation Phillips Curve 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© The Scandinavian Journal of Economics 1981

Authors and Affiliations

  • Martin Paldam
    • 1
  1. 1.Aarhus UniversityAarhusDenmark

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