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Inflation, minimum wage and other wages: an econometric study on French macroeconomic data

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Abstract:

This study examines the set of interdependences between the formation of wages, prices and the minimum wage (SMIC) through a vectorial error correction model estimated on French quarterly macroeconomic data covering the 1970 1/1999 4 period. Two periods are distinguished: the period of inflation rise from 1970 to 1981, which coincides with an important squeeze of the wage range, measured by the ratio of the minimum wage to the hourly wage rate; the period of disinflation since 1981, that has been concomitant with a stability of wage inequalities. Disinflation has hardly benefited the evolution of the SMIC which has always profited by price rises, in real and relative terms, which have become less strong. This evolution does not benefit any more on wage rises, when the interdependences between variables are taken into account. The SMIC seems however to have gained in efficiency as an instrument on wage disparity reduction. It rises are finally more persistent in real terms and relatively to the other salaries and have always as little inflationary impact on wages as on prices.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840410001674213

Affiliations: 1: Department of Economics EPEE, University of Evry Val d'Essonne 4 bd. Fran├žois Mitterrand 91025 Erry cedex France 2: EPEE EUREQua Sorbonne University, and IZA Bonn

Publication date: March 1, 2004

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