Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203056 
Year of Publication: 
2018
Series/Report no.: 
LEM Working Paper Series No. 2018/03
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
We integrate a centralized wage bargaining process into an otherwise standard DSGE model with a financial accelerator to simulate distributional shocks in the presence of financial instability. Our framework provides a counterfactual analysis of the effects of the observed decrease in the labor share when no concomitant rise in households' credit offsets the adverse effect on consumption. The result is a prolonged under-consumption recession that outweighs the initial boost in investment.
Subjects: 
Income inequality
Distributional shocks
Under-consumption
JEL: 
E70
C63
E03
E52
Document Type: 
Working Paper

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