NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Union Wage Settlements During a Disinflation

John B. Taylor

NBER Working Paper No. 985 (Also Reprint No. r0469)
Issued in September 1982
NBER Program(s):   EFG

This paper examines the role of union wage contracts in the persistence of inflation, and the implication of these contracts for the problem of disinflation in the United States. A quantitative model of overlapping con- tracts explicitly oriented toward the major union sector is developed. The model takes account of expectations of future wage, price, and employment conditions as in more aggregated models that have been used in macroeconomic research. In addition, the distribution of workers according to contract length as well as deferred wage increases and escalator clauses are explicitly used in the model. The main aim of the model is to determine the constraints which these contracts impose on disinflation paths. The model indicates that the maximum speed of disinflation is extremely slow in the early phases -- if a rise in unemployment is to be avoided -- but increases considerably before the new lower rate of inflation is reached. The disinflation path is considerably slower than that observed after hyperinflation periods. However, the existence of a path of inflation reduction raises questions about whether the institution of union wage con- tracts is really the direct cause of costly disinflations, or whether their influence works indirectly by raising credibility problems about a monetary disinflation.

download in pdf format
   (460 K)

email paper

This paper is available as PDF (460 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0985

Published: Taylor, John B. "Union Wage Settlements During a Disinflation." The American Economic Review, Vol. 73, No. 5, (December 1983), pp. 981-993.

Users who downloaded this paper also downloaded these:
Gordon Why Stopping Inflation May Be Costly: Evidence from Fourteen Historical Episodes
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us