Firm Entry, Endogenous Markups and the Dynamics of the Labor Share
AbstractRecent U.S. evidence suggests that the response of the labor share to a productivity shock is characterized by countercyclicality and overshooting. These findings cannot be easily reconciled with existing business cycle models. We extend the standard model of search and matching in the labor market by considering strategic interactions among an endogenous number of producers. This leads to countercyclical price markups. While Nash bargaining is sufficient to capture the labor share countercyclicality, we show that countercyclical markups are key to address the overshooting.
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Bibliographic InfoPaper provided by University of Pavia, Department of Economics and Quantitative Methods in its series Quaderni di Dipartimento with number 168.
Length: 14 pages
Date of creation: Mar 2012
Date of revision:
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Web page: http://dipartimenti.unipv.eu/on-dip/epmq/Home.html
More information through EDIRC
Endogenous Market Structures; Oligopolistic Competition; Firms' Entry; Search and Matching Frictions; Labor Share Overshooting.;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-17 (All new papers)
- NEP-BEC-2012-04-17 (Business Economics)
- NEP-DGE-2012-04-17 (Dynamic General Equilibrium)
- NEP-LAB-2012-04-17 (Labour Economics)
- NEP-MAC-2012-04-17 (Macroeconomics)
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