Canadian wage controls in an eclectic model of wage determination

Abstract

Using a model of wage determination that allows for wage inertia, price expectational and price catch-up influences and quarterly data on annual wage change in new major Canadian settlements for 1967-1987, this paper shows that the Anti-Inflation Board (AIB) wage control programme has a much larger wage restraining influence than is estimated in previous studies. In contrast, the Six and Five wage control programme exerts only a modest restraining influence. Both results are of special interest because the wage determination model used here allows for not only the direct effect of wage controls, but also the indirect wage restraining effect of controls operating through lagged wage changes.