Conventional Incomes Policies

We saw in Chapter 1 that various western governments have attempted, by means of incomes policies, to influence the way in which wages and prices change. In this chapter, in sections 2.1–2.3 we first consider how the effects of an incomes policy might be determined. Theories of wage and price determination are presented and the empirical evidence relating to them is reviewed in sections 2.4–2.8. In section 2.9 the microeconomic implications of an incomes policy are discussed and in section 2.10 the political rationale for an incomes policy is considered. A summary of our conclusions is presented in section 2.11.