Inflation and Labour Market Adjustment: The UK Experience.

In this paper, the author considers a proposed method for testing for the presence of "Keynesian" rigidities in the wage adjustment process, but illustrates that, if any other factors exist that may cause noninstantaneous wage adjustment, then this method cannot be applied. Further, he presents evidence that, for the United Kingdom at least, a wage-setting process that allows for these factors will provide a reasonable explanation of the influence of inflation on labor-market adjustment over the period 1963-79. Copyright 1988 by The London School of Economics and Political Science.