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BPEA Article

Real Wages and Unemployment in the OECD Countries


AN ACTIVE DEBATE iS now under way in the United States, Europe, and
Japan about the scope for expansionary macroeconomic policies in the
near term. Although unemployment is at postwar historical highs in
Europe and the United States and inflation has receded rapidly in the
major economies of the Organization for Economic Cooperation and
Development, there is remarkable reticence in advocating expansionary
policies among the governments of OECD countries. One school of
thought holds that much of the unemployment problem in Europe, and
to a lesser extent in the United States and Japan, results from real wages
at inappropriate levels and thus the problem cannot be ameliorated by
adjusting demand-management policies. The West German Minister of
Economics strongly enunciated this view.


Robert J. Gordon

Stanley G. Harris Professor of the Social Sciences - Northwestern University

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