THE IMPACT OF CONTROLS ON WAGE CONTRACT DURATION.

Incomes policies invariably arouse considerable opposition. It is claimed that they are costly to administer, that, by tinkering with relative prices, they riddle the economy with inefficiencies and that they politicise economic life. It is also argued that where controls do have an impact on wage rates and prices, a point which is by no means universally conceded, agents are driven to (costly) behaviour designed to neutralise effective wage and price ceilings, e.g. wage drift and quality changes. In this paper, the impact of Canada's recent programme of wage controls on wage contract duration was examined. A number of recent papers have suggested that, in addition to contracting costs, inflation uncertainty is an important determinant of contract lengths in the labour market. Using a very large number of individual agreements, it was found that controls are associated with a statistically significant decline in the duration of wage contracts signed in both the private and public sectors. [ABSTRACT FROM AUTHOR]