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Customer Markets, Trade Unions and Stagflation
Ian M. McDonald
New Series, Vol. 54, No. 214 (May, 1987), pp. 139-153
Published by: Wiley on behalf of The London School of Economics and Political Science and The Suntory and Toyota International Centres for Economics and Related Disciplines
Stable URL: http://www.jstor.org/stable/2554387
Page Count: 15
You can always find the topics here!Topics: Employment, Customers, Demand curves, Prices, Labor unions, Macroeconomics, Wages, Unemployment, Market prices, Macroeconomic modeling
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It is shown that customer market analysis combined with trade union wage setting can yield a range of equilibrium levels of employment. Only when employment is forced outside this range can the disequilibrium acceleration or deceleration of prices be expected to operate. Numerical calculations with the customer market model suggest that this range is quite large, implying that the maximum level of unemployment consistent with non-decelerating inflation is way above the minimum level of unemployment consistent with non-accelerating inflation. This model with its range of equilibrium levels appears to be in closer agreement with empirical experience than natural rate of unemployment models.
Economica © 1987 London School of Economics