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Title:Matching labor's share in a search and matching model PDF Logo
Authors:Reicher, Christopher Phillip
Issue Date:2011
Series/Report no.:Kiel Working Papers 1733
Abstract:In the United States, labor’s share of income falls after a positive disturbance to productivity growth or inflation, and it remains low for some time. Previous researchers have argued that the negative relationship between productivity growth and labor’s share is puzzling. I argue otherwise. A search and matching model with infrequently bargained nominal wages would predict the observed behavior of labor’s share after a productivity disturbance, and it also predicts the observed behavior of labor’s share after an inflationary disturbance. Wages at the macroeconomic level seem to be sticky in a way which is consistent with microeconomic evidence; much of the ongoing discussion about the real effects of sticky wages seems to be well-motivated, while sticky price models fail to match the data.
Subjects:sticky wages
sticky prices
staggered Nash bargaining
inflation
productivity
search and matching
labor share
JEL:E24
E25
J23
J31
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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