Cost of Living Adjustment and Business Cycles: Disaggregated Evidence
Electronic Access:
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Summary:
For a sample of US industries, nominal wage and price inflation follow aggregate price inflation closely during economic expansions. Hence, fluctuations in profit markup and real output are moderate in the face of expansionary demand shocks. During recessions, however, industrial nominal wage deflation exceeds that of the aggregate price level. This is in contras to producers’ attempt to maintain, or even increase, industrial real price inflation during recessions. Consistently, the increase in the profit markup is correlated with an increase in output contraction and a reduction in workers’ real standard of living during recessions.
Series:
Working Paper No. 2000/124
Subject:
Business cycles Cost of living Economic growth Inflation Labor Prices Real wages Wage indexation Wages
English
Publication Date:
July 1, 2000
ISBN/ISSN:
9781451854718/1018-5941
Stock No:
WPIEA1242000
Pages:
42
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