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Bargaining Power, Labor Market Institutions, and the Great Moderation

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  • Aaron Pacitti

    (Economics Department, Siena College, 515 Loudon Rd, Loudonville, NY 12211, USA)

Abstract

This paper argues that the low inflation during the Great Moderation had distributional biases and partly resulted from institutional shifts that depressed workers’ bargaining power and thus wage increases. The hypothesis is tested in multiple Phillips curve models using the cost of job loss as a measure of bargaining power for the 1960–2010 sample. Results indicate that rising employment insecurity and a stronger social bargain between firms and their employees — institutions proxied by strikes and the part-time share of employment, and the share of private employees receiving a pension, respectively — have significant negative effects on inflation and improve forecasting accuracy.

Suggested Citation

  • Aaron Pacitti, 2015. "Bargaining Power, Labor Market Institutions, and the Great Moderation," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 41(2), pages 160-182, March.
    • Handle: RePEc:pal:easeco:v:41:y:2015:i:2:p:160-182
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    Cited by:

    1. Robert A Blecker & Michael Cauvel & Y K Kim, 2022. "Systems estimation of a structural model of distribution and demand in the US economy," Cambridge Journal of Economics, Oxford University Press, vol. 46(2), pages 391-420.
    2. Cauvel, Michael & Pacitti, Aaron, 2022. "Bargaining power, structural change, and the falling U.S. labor share," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 512-530.

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