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Menu Costs, Nominal Wage Revisions, and Intracontract Wage Behavior
Author(s) -
Christofides Louis N.,
Laporte Audrey
Publication year - 2002
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/1468-232x.00246
Subject(s) - indexation , wage , economics , monopoly , inflation (cosmology) , efficiency wage , labour economics , duration (music) , microeconomics , monetary economics , monetary policy , art , physics , literature , theoretical physics
We use data from indexed and nonindexed Canadian wage agreements to study the intracontract profile of nominal and real wages. Allowing for endogenous switching between the two indexation categories, we conclude that the number of nominal wage revisions depends on contract duration, expected inflation, and the cost of adjusting wages. Our results have implications for the menu cost, overlapping contracts, dynamic monopoly union, and efficient bargain literatures.