Matching labor’s share in a search and matching model
AbstractI evaluate the degree to which different wage-setting mechanisms in labor market search models can fit the aggregate facts on labor’s share. I find that staggered bargaining in nominal wages best allows the model to plausibly match the negative relationship between labor’s share and lagged productivity growth and inflation. I also evaluate the role of labor’s bargaining weight—a low bargaining weight seems plausible but by itself, it cannot generate the patterns observed in the data. Adding a standard sticky-price mechanism to the model actually degrades the match between the model and the data—in the data, labor’s share is countercyclical, while it is procyclical in the sticky-price model. Theory and data both agree that wage stickiness is relevant at the micro and macro levels
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1733.
Length: 35 pages
Date of creation: Sep 2011
Date of revision:
Sticky wages; sticky prices; staggered Nash bargaining; inflation; productivity; search and matching; labor’s share;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-BEC-2011-09-22 (Business Economics)
- NEP-DGE-2011-09-22 (Dynamic General Equilibrium)
- NEP-LAB-2011-09-22 (Labour Economics)
- NEP-MAC-2011-09-22 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gomme, P. & Greenwood, J., 1992.
"On the Cyclical Allocation of Risk,"
UWO Department of Economics Working Papers
9205, University of Western Ontario, Department of Economics.
- Gomme, P. & Greenwood, J., 1993. "On the Cyclical Allocation of Risk," RCER Working Papers 355, University of Rochester - Center for Economic Research (RCER).
- Paul Gomme & Jeremy Greenwood, 1992. "On the cyclical allocation of risk," Discussion Paper / Institute for Empirical Macroeconomics 71, Federal Reserve Bank of Minneapolis.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
- Enchuan Shao & Pedro Silos, 2011.
"Accounting for the cyclical dynamics of income shares,"
2011-09, Federal Reserve Bank of Atlanta.
- Pedro Silos & Enchuan Shao, 2011. "Accounting for the Cyclical Dynamics of Income Shares," 2011 Meeting Papers 1078, Society for Economic Dynamics.
- Yashiv, Eran, 2006.
"Evaluating the performance of the search and matching model,"
European Economic Review,
Elsevier, vol. 50(4), pages 909-936, May.
- Yashiv, Eran, 2006. "Evaluating the Performance of the Search and Matching Model," IZA Discussion Papers 1931, Institute for the Study of Labor (IZA).
- Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
- Jean-Olivier Hairault, 2002. "Labor-Market Search and International Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 535-558, July.
- Mark Gertler & Luca Sala & Antonella Trigari, 2008.
"An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
- Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Working Papers 341, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Luca Sala & Antonella Trigari & Mark Gertler, 2007. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," 2007 Meeting Papers 353, Society for Economic Dynamics.
- John H. Cochrane, 2007.
"Determinacy and Identification with Taylor Rules,"
NBER Working Papers
13410, National Bureau of Economic Research, Inc.
- Hagedorn, Marcus & Manovskii, Iourii, 2008.
"The cyclical behavior of equilibrium unemployment and vacancies revisited,"
Working Paper Series
0853, European Central Bank.
- Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
- Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
- Marcus Hagedorn & Iourii Manovskii, 2007. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," IEW - Working Papers 351, Institute for Empirical Research in Economics - University of Zurich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.