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Customer Markets, Trade Unions and Stagflation

Ian M. McDonald
Economica
New Series, Vol. 54, No. 214 (May, 1987), pp. 139-153
DOI: 10.2307/2554387
Stable URL: http://www.jstor.org/stable/2554387
Page Count: 15
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Customer Markets, Trade Unions and Stagflation
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Abstract

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.

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