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

Avner Bar-Ilan
, Alessandro Zanello

Research output: Contribution to journal › Article › peer-review

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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AB - 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.

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

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JO - Economics Letters

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Aversion to price variability and the optimal degree of wage indexation

Abstract

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