The Distribution of Excess Demand for Labor and the Phillips Curve

  • Rolf Jens Brunstad


It is rigorously demonstrated that a relation which has the main characteristics of the curve found by Phillips will exist, provided that the distribution of excess demand over submarkets is constant in a certain sense. The excess demand for labor in each submarket is divided into two components: the cyclical component common to all submarkets and the structural component specific to the sub-market in question. Relative excess demand in each submarket is the product of the cyclical and structural components minus one. Assuming for simplicity that the structural components are continuously distributed, the Phillips curve is then derived from the cumulative density function of this distribution. It is also shown that changes in the spread of this distribution will alter the position of the Phillips curve and the natural rate of unemployment. It is demonstrated that, unless checked by exogenous forces, endogenous market forces in each sub-market and mobility between submarkets will tend to move the Phillips curve inwards, whereas the Scandinavian type of trade unionism will counteract this tendency.


Structural Component Labor Supply Natural Rate Excess Demand Wage Level 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Archibald, G. C.: The structure of excess demand for labour. In Phelps et al. (eds.). Microeconomic foundations of employment and inflation theory. Macmillan, London, 1971.Google Scholar
  2. Friedman, M.: The role of monetary policy. American Economic Review, 1968.Google Scholar
  3. Friedman, M.: Unemployment versus inflation? An evaluation of the Phillips curve. IEA Occasional Papers. 44, 1975.Google Scholar
  4. Friedman, M.: Nobel Lecture: Inflation and unemployment. Journal of Political Economy, 1977.Google Scholar
  5. Hansen, B.: Excess demand, unemployment, vacancies and wages. Quarterly Journal of Economics 84, 1970.Google Scholar
  6. Lipsey, R. G.: The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1862–1957. A further analysis. Economica 27, 1960.Google Scholar
  7. NOU: Om lønnsglidningen (Norwegian Official Reports 1976: 26, On Wage Drift). Universitetsforlaget, Oslo, 1976.Google Scholar
  8. Perlman, R.: Labour theory. Wiley, New York, 1969.Google Scholar
  9. Phelps, E. S.: Phillips curve, expectations and optimal unemployment over time. Economica 34, 1967.Google Scholar
  10. Phillips, A. W.: The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957. Economica 25, 1958.Google Scholar
  11. Rothschild, M. & Stiglitz, J. E.: Increasing risk: A definition and its economic consequences. Journal of Economic Theory 2, 1970.Google Scholar
  12. Rødseth, T.: Utredning om lavtlønnsproblemer i Norge. Lønns- og prisdepartementet (Report on problems of low wages in Norway. Ministry of Wages and Prices). Oslo, 1969.Google Scholar

Copyright information

© The Scandinavian Journal of Economics 1981

Authors and Affiliations

  • Rolf Jens Brunstad
    • 1
  1. 1.Institute of Industrial EconomicsBergenNorway

Personalised recommendations