Keywords: Inflation, wage curve, Phillips curve
Abstract: The standard derivation of the accelerationist Phillips
curve relates expected real wage inflation to the unemployment rate and invokes
a constant price markup and adaptive expectations to generate
the accelerationist price inflation formula.
Blanchflower and Oswald (1994) argue that
microeconomic evidence of a low autoregression
coefficient in real wage regressions invalidates the
macroeconomic Phillips curve. This conclusion has been disputed by a number
of authors on the grounds that the true
autoregression coefficient is close to 1. This paper shows
that given the assumption of a constant price markup, micro-level real wage dynamics
have no observable implications for macro data on wage and price inflation.
Full paper (205 KB PDF)
| Full paper (192 KB Postscript)
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Last update: January 27, 1998