Unemployment, wage indexation and commercial policies

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Abstract

This paper shows the effects of wage indexation schemes in the presence of relative price variations. In particular, it is shown that indexation schemes which seem reasonable can nevertheless leave the level of employment vulnerable to terms of trade shocks. The indexation scheme which isokates the employment level from the effects of price variations is derived, and the effects of commercial policies in the presence of indexation are examined.

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Cited by (2)

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We thank two anonymous referees for valuable comments.

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