@techreport{NBERw1586,
 title = "Macroeconomic Stabilization Through Taxation and Indexation:  The use ofFirm-Specific Information",
 author = "Richard C. Marston and Stephen J. Turnovsky",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "1586",
 year = "1986",
 month = "March",
 URL = "http://www.nber.org/papers/w1586",
 abstract = {This paper considers two alternative approaches to stabilizing an economy with firm-specific productivity disturbances. The first uses wage contracts tying wages in each firm to these disturbances as well as the price level. The second uses a tax on firms which modifies their supply behavior together with a simple waqe indexation rule tying wages to prices alone. Both these schemes are viable as long as the firm-specific disturbance is known to all agents. If the firm alone observes the productivity disturbance, under either scheme it has an incentive to misrepresent current conditions. However, a combination of these two schemes is both welfare maximizing and incentive compatible.},
}