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The expectation system and the wage policy: indexation x prefixing

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  • César Costa Alves de Mattos

Abstract

This article intends to compare wage policies based upon conventional indexationon past inflation schemes versus pre-fixation ones. The structure of responses of theeconomic agents to wage policy will be significantly different in each other of these twoapproaches, and it will be crucial to determine the possibilities of the success of that strategyas an anti-inflationary one. Otherwise, the principal focus of that work will be the wage pre--fixation scheme and its relationship with the expectations of economic agents. The crucialissue to be analyzed will be the credibility of the government with respect the workers andtheir unions in general. ln some contexts, the lack of credibility of the government will leadthe wage policy to be almost irrelevant in the effective wage fixing of economy. Toe principalconclusion will be that pre-fixation will be a risky alternative but may be the most attractiveway of fighting inflation in countries with chronic inflationary situations like Brazil. JEL Classification: E31; J31; J33.

Suggested Citation

  • César Costa Alves de Mattos, 1993. "The expectation system and the wage policy: indexation x prefixing," Brazilian Journal of Political Economy, Center of Political Economy, vol. 13(2), pages 314-320.
    • Handle: RePEc:ekm:repojs:v:13:y:1993:i:2:p:314-320:id:1328
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    Keywords

    Inflation; wage policy;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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