- Title
- Income Redistribution During a Disinflation and its Effect on the Disinflation Path
- Author(s)
- Jesse M. Abraham Jesse Abraham (Data Resources Inc.)
- Abstract
- It is often said that wage adjustment during a disinflation is sluggish because those who might initiate any downward movement fear a per- manent real income loss. Yet there remains little empirical work on this subject. This paper estimates the income redistribution among different sectors of society that results from a government disinflation policy. A model of wage setting in the U.S. economy is developed, then simulated for alternative money growth paths and private sector behavioral para- meters. It is found that a sudden change in monetary policy can cause a significant amount of income redistribution. A slow monetary deceleration may take slightly longer to achieve a disinflation, but there will be significantly less redistribution, greater price stability, and perhaps greater responsiveness of wage setting to monetary policy.
- Creation Date
- 1983-06
- Section URL ID
- IRS
- Paper Number
- 165
- URL
- https://dataspace.princeton.edu/bitstream/88435/dsp01pc289j06x/1/165.pdf
- File Function
- Jel
- Keyword(s)
- Suppress
- false
- Series
- 1