Stabilization Policies and the Information Content of Real Wages

Joshua Aizenman

No 1373, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The purpose of this paper is to compare the behavior of an economy subject to labor contracts with an economy where the labor market clears in an auction manner. Such a comparison is intended to reveal the information content of real wages in a flexible economy. The analysis reveals two distinct costs inflicted by nominal contracts and demonstrates that optimal macro policies can eliminate one of them.

Date: 1984-06
Note: EFG
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Published as Aizenman, Joshua."Stabilization Policies and the Information Content of Real Wages," Economica, Vol. 53, pp. 181-190, 1986.

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