Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300570 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 234/2024
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
Inflationary processes are closely linked to wage-price spirals - such spirals can be triggered by many factors, including natural resource price shocks, depreciation and inflationary demand. Empirically, the correlation between changes in nominal unit labour costs and the price level is strong for almost all OECD countries, at levels above 0.8. The clear policy conclusion is to make wages and the nominal exchange rate anchors for the price level, which implies that nominal wages should increase according to trends in productivity and the target inflation rate of the central bank. Wage developments without structural changes in the medium term have limited effects on functional income distribution on a macroeconomic level. The structural factors in question include the existence and spread of markets with monopolies, oligopolies and monopsonies as well as corporate governance systems and the power of trade unions to influence profit sharing in companies with rent.
Subjects: 
Wage-price spiral
inflation
functional distribution
JEL: 
E12
E31
E64
Document Type: 
Working Paper

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