Relative-price seasonality, wage indexation and the perfect price index

Research output: Contribution to journalArticlepeer-review


This paper defines the perfect price index as the price index which, if used for wage indexation, maximizes a worker's expected utility for given present value of the payment from a firm, and it shows how the perfect price index depends on the attributes of the worker's utility function and on the relative-price seasonality. Since in practice labor contracts rely on an official price index published in either unadjusted or deseasonalized form, the paper also examines when either form of the official price index provides the belter basis for wage indexation, and it shows how this is revealed by the design of the perfect price index.

Original languageEnglish
Pages (from-to)1145-1167
Number of pages23
JournalEuropean Economic Review
Issue number6
StatePublished - 1 Jan 1986
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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