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Inflation And The Dispersion Of Real Wages

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  • Alok Kumar
Abstract
The article studies the effects of inflation on real wage dispersion in a search‐monetary framework. The economy is characterized by frictions in both the goods and the labor markets. In the goods market, buyers and sellers bargain over prices, whereas in the labor market firms post wage offers. In equilibrium, a lower inflation rate increases the dispersion of real wages. This result is consistent with both the observed trends in wage dispersion and the inflation rate witnessed in the 1980s and the 1990s in the United States and the empirical literature linking reduced inflation to greater wage dispersion.

Suggested Citation

  • Alok Kumar, 2008. "Inflation And The Dispersion Of Real Wages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 377-399, May.
    • Handle: RePEc:wly:iecrev:v:49:y:2008:i:2:p:377-399
    DOI: 10.1111/j.1468-2354.2008.00484.x
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    References listed on IDEAS

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    Cited by:

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    2. Seip, Knut Lehre & McNown, Robert, 2015. "Does employees’ compensation vary with corporate profit?," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 281-290.

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