Journal of Labor Economics Vol. 10 No. 3 1992
The Determinants of Wage Changes in Indexed and Nonindexed Contracts: A Switching Model
Abstract
Wage changes in a sample (1979-86) of Canadian wage contracts are analyzed. The sample is split into cost-of-living allowance (COLA) and non-COLA contracts. Econometric estimation corrects for sample selectivity bias. In non-COLA contracts, the unemployment rate and a proxy for expected inflation are significant. Expected industry price changes and productivity changes exert smaller but significant effects. In COLA contracts, ex ante inflation coverage ranges between 60% and 100% of expected inflation. Catch-up for previous uncompensated inflation, the unemployment rate, and expected inflation are also significant. A common wage structure across COLA and non-COLA contracts is rejected by the data.
- DOI
- 10.1086/298290
- Volume
- 10
- Issue
- 3
- Pages
- 331-355
- Language
- en
- Sources
- openalex crossref