Wage Curve vs. Phillips Curve: Are There Macroeconomic Implications? I Am Grateful to Eric Engstrom for Research Assistance And

The standard derivation of the accelerationist Phillips curve relates expected real wage innation to the unemployment rate and invokes a constant price markup and adaptive expectations to generate the accelerationist price innation formula. Blanchhower and Oswald (1994) argue that microeconomic evidence of a low autoregression coeecient 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 coeecient 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 innation. Schnure for comments. The views expressed in this paper are those of the author and do not necessarily reeect the views of the Board of Governors or the staa of the Federal Reserve System. Email: [email protected].