Trade Unions, Wage Formation and Macroeconomic Stability—An Introduction

Abstract

The process of wage formation is a crucial aspect of the current discussion about the causes of stagflation. In fact, differences between various policy prescriptions usually depend on differing assumptions about wage responses. Proposals to reduce unemployment through expansion of monetary demand are usually based on assumptions of rigid money wages. In contrast, recommendations of non-intervention policies often rest on the opposite assumption of rigid real wages, in which case monetary expansion will cause inflation but not affect employment.

This issue contains the proceedings from a conference held in Saltsjöbaden, Sweden, August 26–29, 1984. The conference was organized by the Institute for International Economic Studies, University of Stockholm, and financed by The Bank of Sweden Tercentenary Foundation.

I am grateful for helpful comments from Bertil Holmlund, Seppo Honkapohja, Henrik Horn, Richard Jackman, Assar Lindbeck, John McCallum, Andrew Oswald, John Pencavel, Robert Solow, Lars Svensson, Hans Söderström and Eskil Wadensjö.