Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 326-336 |
| Number of pages | 11 |
| Journal | The Scandinavian Journal of Economics |
| Volume | 86 |
| Issue number | 3 |
| State | Published - 1984 |