Productivity Growth and the Phillips Curve

52 Pages Posted: 14 Aug 2001 Last revised: 7 Jul 2022

See all articles by Laurence Ball

Laurence Ball

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)

Robert A. Moffitt

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2001

Abstract

We present a model in which workers' aspirations for wage increases adjust slowly to shifts in productivity growth. The model yields a Phillips curve with a new variable: the gap between productivity growth and an average of past wage growth. Empirically, this variable shows up strongly in the U.S. Phillips curve. Including it explains the otherwise puzzling shift in the unemployment-inflation tradeoff since 1995.

Suggested Citation

Ball, Laurence M. and Moffitt, Robert, Productivity Growth and the Phillips Curve (August 2001). NBER Working Paper No. w8421, Available at SSRN: https://ssrn.com/abstract=279708

Laurence M. Ball (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States
410-516-7605 (Phone)
410-516-7600 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
410-516-7605 (Phone)
410-516-7600 (Fax)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Robert Moffitt

Johns Hopkins University - Department of Economics ( email )

Baltimore, MD 21218-2685
United States
410-516-7611 (Phone)
410-516-7600 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States