The Determinants of Wage Pressure: Some Implications of a Dynamic Model.

Most models of wage determination are static. This paper analyzes a simple dynamic model of collective bargaining and argues that this provides insights into the determinants of wage pressure that a static model cannot provide. In particular, it is shown how the length of labor contracts and the dynamics of the labor market affect the level of aggregate wage pressure. The policy implications of the model are very different from those traditionally put forward to moderate wage pressure. Copyright 1991 by The London School of Economics and Political Science.