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The price-wage spiral

by: Brems, Hans; University of Illinois at Urbana-Champaign. College of Commerce and Business Administration

Publication date: 1979

Topics: Wage-price policy, Inflation (Finance), Equilibrium (Economics)

Publisher: [Urbana, Ill.] : College of Commerce and Business Administration, University of Illinois at Urbana-Champaign

Collection: university_of_illinois_urbana-champaign; americana

Contributor: University of Illinois Urbana-Champaign

Language: English

Volume: BEBR No.559

Includes bibliographical references (leaves 44-45)

"The paper opens the neoclassical growth model to unemployment and inflation and solves for steady-state equilibrium rates of growth and interest. A price equation is dervied from profit maximization and includes the wage expectations of the entrepreneurs. A wage equation is based on the Phillips function and includes the price expectations of labor. A price-wage equilibrium is defined as self-fulfilling expectations. The existence and the properties of such an equilibrium are examined. Policy conclusions are drawn. Finally, the paper determines the extent to which Wiksellian, Keynesian, and monetarist ideas may coexist in neoclassical growth."