2023-09-28 14:46:10 +00:00
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abstract: 'We incorporate inequality aversion into an otherwise standard New
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Keynesian dynamic stochastic equilibrium model with Calvo wage contracts
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and positive inflation. Workers with relatively low incomes experience
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envy, whereas those with relatively high incomes experience guilt. The
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former seek to raise their income and the latter seek to reduce it. The
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greater the inflation rate, the greater the degree of wage dispersion
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under Calvo wage contracts, and thus the greater the degree of envy and
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guilt experienced by the workers. Since the envy effect is stronger than
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the guilt effect, according to the available empirical evidence, a rise
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in the inflation rate leads workers to supply more labor over the
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contract period, generating a significant positive long-run relation
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between inflation and output (and employment), for low inflation rates.
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Provided that wage adjustments are costly, this tradeoff remains
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significant even once the degree of wage stickiness adjusts to the
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inflation rate. This Phillips curve relation, together with an
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inefficient zero-inflation steady state, provides a rationale for a
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positive long-run inflation rate. Given standard calibrations, optimal
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monetary policy is associated with a long-run inflation rate around 2\%.
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(C) 2014 Elsevier B.V. All rights reserved.'
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affiliation: 'Ahrens, S (Corresponding Author), Tech Univ Berlin, Str 17 Juni 135,
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D-10623 Berlin, Germany.
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Ahrens, Steffen, Tech Univ Berlin, D-10623 Berlin, Germany.
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Ahrens, Steffen; Snower, Dennis J., Kiel Inst World Econ, D-24105 Kiel, Germany.
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Snower, Dennis J., Univ Kiel, D-24118 Kiel, Germany.
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Snower, Dennis J., CEPR, London, England.
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Snower, Dennis J., IZA, Bonn, Germany.'
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author: Ahrens, Steffen and Snower, Dennis J.
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author-email: 'steffen.ahrens@tu-berlin.de
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dennis.snower@ifw-kiel.de'
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author_list:
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- family: Ahrens
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given: Steffen
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- family: Snower
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given: Dennis J.
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da: '2023-09-28'
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doi: 10.1016/j.jebo.2013.12.015
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eissn: 1879-1751
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files: []
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issn: 0167-2681
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journal: JOURNAL OF ECONOMIC BEHAVIOR \& ORGANIZATION
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keywords: Inflation; Long-run Phillips curve; Fairness; Inequality aversion
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keywords-plus: 'LONG-RUN NEUTRALITY; OPTIMAL MONETARY-POLICY; MAINTAINING LOW INFLATION;
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PRICE ADJUSTMENT COSTS; STAGGERED WAGE; INDIVIDUAL SENSE; TREND
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INFLATION; DECISION-MAKING; SOCIAL UTILITY; INTEREST-RATES'
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language: English
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month: MAR
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number-of-cited-references: '138'
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pages: 69-84
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papis_id: eef68d418a4c40e630863857d8df662d
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ref: Ahrens2014envyguilt
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times-cited: '6'
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title: Envy, guilt, and the Phillips curve
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2023-10-01 08:15:07 +00:00
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type: article
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2023-09-28 14:46:10 +00:00
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unique-id: WOS:000333494300005
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usage-count-last-180-days: '0'
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usage-count-since-2013: '10'
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volume: '99'
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web-of-science-categories: Economics
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year: '2014'
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