18841. The Rational Basis of Wage Determination in Regimes of High Inflation
- Author:
- Edward J. Amadeo
- Publication Date:
- 05-1993
- Content Type:
- Working Paper
- Institution:
- Kellogg Institute for International Studies
- Abstract:
- In this paper we address the logic of wage determination in a regime of high and accelerating inflation, and the rational basis of 'overindexation' of wages. We discuss the incentives and costs of wage overindexation to the workers, and the determination of the 'optimal' level of wage adjustment. We argue that the degree of overindexation is likely to increase as negotiations become more centralized at the industry level. However, at near-national levels of wage negotiation, the incentives to overindex become much smaller. We also argue that increasing uncertainty over the future path of inflation tends to increase the degree of indexation of wages.
- Topic:
- Development, Labor Issues, Economic Growth, Inflation, and Wages
- Political Geography:
- South America