Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964‐74

Pravin Trivedi and J. Rayner

The Economic Record, 1978, vol. 54, issue 2, 195-218

Abstract: This paper attempts to explain the determination of average award wage changes without assuming that the outcome of certain strategic wage settlements is known. Models which allow for habit‐inertia and comparison effects are constructed. It is argued that the main impact of these factors is on the specification and interpretation of lagged adjustment of wages to changes in its determinants. These models are empirically tested using the pre‐indexation quarterly data. An analysis of 1973‐74 wage experience is also provided.

Date: 1978
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