Wage Inflation, Unionization, and Monopoly Power.

This paper uses panel data from 301 four-digit manufacturing industries over the years 1959 to 1980 to examine how market structure affects the wage response to aggregate demand disturbances. The authors use a new classical macroeconomic framework in which such shocks are identified with the unexpected component of money growth. They find that product market power does not affect the response of wages to such shocks, but that unionization does. To be specific, greater unionization leads to a faster wage response. They also find that wages rise equiproportionately with expected money growth, i.e., expected money is neutral. Copyright 1990 by Blackwell Publishing Ltd.