Price formation is an increasingly important part of modern macroeconomics. However, the empirical literature on price-setting is diverse and confused. This paper uses cointegration techniques to test theories of price-setting on U.K. aggregate data for 1951-91. The author finds: (1) domestic...

In this paper the authors examine the effect of skilled labor shortages on productivity in the UK. They develop a simple model that explains how skill shortages might reduce productivity and its rate of growth. Shortages may lead firms to substitute unskilled for skilled workers thereby reducing...