Wage Curve vs . Phillips Curve : Are There Macroeconomic Implications ?

The standard derivation of the accelerationist Phillips curve relates expected real wage in ation to the unemployment rate and invokes a constant price markup and adaptive expectations to generate the accelerationist price in ation formula. Blanch ower and Oswald (1994) argue that microeconomic evidence of a low autoregression coe cient in real wage regressions invalidates the macroeconomic Phillips curve. This conclusion has been disputed by a number of authors on the grounds that the true autoregression coe cient is close to one. This paper shows that given the assumption of a constant price markup, micro-level real wage dynamics in fact have no observable implications for macro data on wage and price in ation. I am grateful to Eric Engstrom for research assistance and Daron Acemoglu, Olivier Blanchard, Charles Fleischman, Spencer Krane and Calvin Schnure for comments. The views expressed in this paper are those of the author and do not necessarily re ect the views of the Board of Governors or the sta of the Federal Reserve System. Email: [email protected].