Smith, Peter N. and Thomas, Stephen H.
Wage dispersion and inflation: evidence from UK manufacturing industries
Economics Letters, 37, (4), . (doi:10.1016/0165-1765(91)90071-R).
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We specify a model relating wage dispersion across 16 sectors of UK manufacturing to a rich array of sector specific and macroeconomic variables. We find sectoral vacancy dispersion, a trade-union power proxy, short-run unemployment, and inflation affect wage dispersion. In particular, we find a strong negative relation between wage dispersion and inflation surprises within a well-specified model, reinforcing similar findings for the US and Israel.
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