Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227873
Authors: 
Faccini, Renato
Melosi, Leonardo
Year of Publication: 
2020
Series/Report no.: 
Danmarks Nationalbank Working Papers No. 155
Abstract: 
The low rate of inflation observed in the U.S. over the entire past decade is hard to reconcile with traditional measures of labor market slack. We show that an alternative notion of slack that encompasses workers' propensity to search on the job explains this missing inflation. We derive this novel concept of slack from a model in which a drop in the on-the-job search rate lowers the intensity of interfirm wage competition to retain or hire workers. The on-the-job search rate can be measured directly from aggregate labor-market flows and is countercyclical. Its recent drop is corroborated by micro data.
Subjects: 
Missing inflation
on-the-job search
employment-to-employment rate
labor market slack
Phillips curve
cyclical misallocation
JEL: 
E31
E37
C32
Document Type: 
Working Paper

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