An Empirical Model of Wage Indexation Provisions in Union Contracts

David Card

No 1388, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Cost of living escalators are an important feature of North American labor contracts. This paper presents a measure of the response of index-linked wage increases to concurrent price increases for a sample of Canadian contracts, and then analyses this response in terms of a simple model of indexation to the aggregate price level. The model highlights the importance of aggregate price movements in conveying information about industry-specific prices. The empirical analysis confirms that industry-specific correlations between input and output prices and the Consumer Price Index are important determinants of the response of wage to prices across index contracts.

Date: 1984-06
Note: LS
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Published as Card, David. "An Empirical Model of Wage Indexation Provisions in Union Contracts." Journal of Political Economy, Vol. 94, No. 3, Part 2, pp. S144-S 175, June 1986.

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