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Real Wage Rigidity and the Effect of an Oil Discovery

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  • Bean, Charles R

Abstract

This paper analyzes the macroeconomic impact of an oil discovery wh en there is sluggish adjustment of real rather than nominal wages. A recession (boom) will occur if the share of nontradable employment in total employment is s mall (large), if the share of nontradable consumption in total consumption is large (small) , and if the elasticity of nontradable employment, with respect to wages, is small (large) relative to that of employment in the tradables sector. The effect of the oil discovery on wage pressure is also shown to be crucial in determining the likelihood of a recession. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Bean, Charles R, 1988. "Real Wage Rigidity and the Effect of an Oil Discovery," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 451-462, September.
    • Handle: RePEc:oup:oxecpp:v:40:y:1988:i:3:p:451-62
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    Cited by:

    1. van der Ploeg, Frederick, 2019. "Macro policy responses to natural resource windfalls and the crash in commodity prices," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 263-282.
    2. Wen-Ya Chang & Ching-Chong Lai, 2002. "The Policy Assignment Principle with Wage Indexation," The American Economist, Sage Publications, vol. 46(2), pages 80-87, October.
    3. Rick Van der Ploeg, 2016. "Macro Policy Responses To Natural Resource Windfalls," OxCarre Working Papers 178, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    4. Francesco Guidi, 2010. "The Economic Effects of Oil Prices Shocks on the UK Manufacturing and Services Sectors," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 5-34, October.

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