The choice between an indexed and an unindexed wage in a labor contract is studied in this paper. It is shown that the expected rate of inflation does not affect the attractiveness of indexation; that an increase in the uncertainty of inflation and an increase in the worker's risk aversion lead to an increase in the attractiveness of indexation; and that an increase in the cost of indexation and an increase in the perfection of the capital market lead to a decrease in the attractiveness of indexation.
|Number of pages||11|
|Journal||The Scandinavian Journal of Economics|
|State||Published - 1984|