EconPapers    
Economics at your fingertips  
 

Fairness and Inflation Persistence

John Driscoll () and Steinar Holden ()

Journal of the European Economic Association, 2004, vol. 2, issue 2-3, 240-251

Abstract: We argue that peoples' concern for fairness may explain an unsolved puzzle in macroeconomics: the persistence of inflation. We extend a 1990 wage-contracting model of Bhaskar in which workers' disutility from being paid less than other workers exceeds their utility from being paid more. This model generates a continuum of equilibria over a range of wages and unemployment rates. If workers' expectations are based on the past behavior of wage growth, these beliefs will be self-fulfilling, generating inflation persistence within, but not outside of, this range. Based on quarterly U.S. data over the period 1955-2000, we find evidence that inflation is more persistent between unemployment rates of 4.7 and 6.5% than outside these bounds. (JEL: E31, E3, E5) Copyright (c) 2004 The European Economic Association.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (23) Track citations by RSS feed

Downloads: (external link)
http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:240-251

Ordering information: This journal article can be ordered from
http://www.mitpressjournals.org/jeea

Access Statistics for this article

Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

More articles in Journal of the European Economic Association from MIT Press
Bibliographic data for series maintained by Ann Olson ().

 
Page updated 2020-07-03
Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:240-251