Chair of Innovation, Competition Policy and New Institutional Economics

2012-01

Number
2012-01
Authors
Steffen Ahrens, Dennis J. Snower
Title
Envy, Guilt, and the Phillips Curve
Abstract We incorporate inequity aversion into an otherwise standard New Keynesian dynamic equilibrium model with Calvo wage contracts and positive inflation. Workers with relatively low incomes experience envy, whereas those with relatively high incomes experience guilt. The former seek to

Keywords: inflation, long-run Phillips curve, fairness, inequity aversion

JEL classification: D03, E20, E31, E50
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