Abstract
Recent structuralist ideas about real and money wage changes are reviewed, addressing six questions: (1) In an economy closed to trade, do real wage increases cause output to rise or fall? (2) If output is at an upper bound, what are the roles of real wage and wealth movements in macro adjustment? (3) Taking effective demand into account, do money wage cuts stimulate employment? (4) In an open economy, does money wage reduction or devaluation make output rise? (5) At an output bound, what are the respective roles of wage reduction and monetary restraint in slowing inflation? (6) If inflation is driven by cost with output below capacity, how do wage dynamics affect stabilization programmes based on de-indexation and price freezes? Institutional factors suggest that wage-cutting may be a counterproductive answer to all these policy questions in semi-industrialized economies.
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