ARE WAGES FORWARD-LOOKING

This paper presents a study of UK earnings over the period 1967-87 aim ed at establishing whether wage setters anticipate future movements in prices. Two models are proposed: the first where agents form rational predictions about future price movements, and the second where they u se simple rules-of-thumb, based on past price movements. These two dyn amic models, based on the same long-run equation, are compared, drawin g on the methods of Hendry.