Journal of Economic Perspectives: Vol. 12 No. 2 (Spring 1998)


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Real and Money Wage Rates

Article Citation

Dunlop, John T. 1998. "Real and Money Wage Rates." Journal of Economic Perspectives, 12(2): 223-234.

DOI: 10.1257/jep.12.2.223


In the General Theory, John Maynard Keynes held money and real wage rates move in opposite directions. In expansion, prices increase faster because of increasing costs and a rise in the proportion of product going to profits. Neoclassical economists held similarly. Money illusion of workers supported their common view. The author's 1938 article rather showed a procyclical pattern, significant to macroeconomic models of the economy. Contemporary literature with new elements of compensation and new measures of wages supports a slightly procyclical relationship. Increased output and employment in expansion do not require lower real wages.

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Dunlop, John T. (Harvard U)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital


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