The Costs of Price Stability

In most European countries, the prevailing terms of employment, including the nominal wage, can be changed only by mutual consent. This legal feature gives workers a strategic advantage in wage negotiations when employers push for a nominal wage cut. The upshot is a long‐run trade‐off between inflation and unemployment for low levels of inflation, in spite of all agents being rational and with no expectational errors. Specifically, downward nominal wage rigidity and excess unemployment at zero inflation are related to three factors: the coverage of collective agreements, the legal framework at contract renewal, and the strictness of the employment protection legislation for non‐union workers

Economics · Inflation (cosmology) · Labour economics · Macroeconomics · Monetary economics · Monetary policy · Negotiation · Price of stability · Rigidity (electromagnetism) · Unemployment · Wage · Economic Policies and Impacts · Economic theories and models · Monetary Policy and Economic Impact

• European firm adjustment during times of economic crisis

  Open Access•Silvia Fabiani, Ana Lamo et al.•IZA Journal of Labor Policy•2015

  Incluir item

• The resurgence of German capital in Europe

  Kees Van Der Pijl, Otto Holman et al.•Review of International Political…•2010

  Incluir item

• Why Wages Don't Fall during a Recession

  Open Access•Truman F Bewley•Why Wages Don't Fall During a…•1999

  Incluir item

• Perfect Equilibrium in a Bargaining Model

  Ariel Rubinstein•Econometrica•1982

  Incluir item

• Money Illusion

  Eldar Shafir, Peter Dia­mond et al.•The Quarterly Journal of Economics•1997

  Incluir item

• The General Theory of Employment

  John Maynard Keynes•The Quarterly Journal of Economics•1937

  Incluir item

• The Nash Bargaining Solution in Economic Modelling

  Open Access•Ken Binmore, Ariel Rubinstein et al.•The RAND Journal of Economics•1986

  Incluir item

• Insiders, Outsiders, and Nominal Wage Contracts

  Nils Gottfries•Journal of Political Economy•1992

  Incluir item

• Wage Drift and Bargaining

  Steinar Holden•Economica•1989

  Incluir item

• Asymmetric Price Adjustment and Economic Fluctuations

  Laurence Ball, N Gregory Mankiw•The Economic Journal•1994

  Incluir item

• Nominal Wage Rigidity and the Rate of Inflation

  Open Access•Stephen Nickell, Glenda Quintini•The Economic Journal•2003

  Incluir item

• Union's Threats and Wage Determination

  Karl Ove Moene•The Economic Journal•1988

  Incluir item

• The Macroeconomics of Low Inflation

  George A Akerlof, William T Dickens et al.•Brookings Papers on Economic…•1996

  Incluir item

• International Encyclopaedia for Labour Law and Industrial Relations

  Herbert L Sherman, Roger Blanpain•Industrial and Labor Relations…•1981

  Incluir item