Aversion to price variability and the optimal degree of wage indexation

Avner Bar-Ilan; Alessandro Zanello

doi:10.1016/0165-1765(91)90131-4

Aversion to price variability and the optimal degree of wage indexation

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Abstract

In this paper we explore possible explanations for the observed low amount of wage indexation. We first consider the notion that the stochastic structure of the economy may offer a rationalization for this observation, and argue that this does not seem likely. We next suggest that a preference for price stability may playa role in wage determination. A low degree of indexation is chosen because it reduces the variability of prices.

Original language	English
Pages (from-to)	197-201
Number of pages	5
Journal	Economics Letters
Volume	37
Issue number	2
DOIs	https://doi.org/10.1016/0165-1765(91)90131-4
State	Published - Oct 1991
Externally published	Yes

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/0165-1765(91)90131-4

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title = "Aversion to price variability and the optimal degree of wage indexation",

abstract = "In this paper we explore possible explanations for the observed low amount of wage indexation. We first consider the notion that the stochastic structure of the economy may offer a rationalization for this observation, and argue that this does not seem likely. We next suggest that a preference for price stability may playa role in wage determination. A low degree of indexation is chosen because it reduces the variability of prices.",

author = "Avner Bar-Ilan and Alessandro Zanello",

year = "1991",

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DO - 10.1016/0165-1765(91)90131-4

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Aversion to price variability and the optimal degree of wage indexation

Abstract

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