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Monetary Policy and Labor Income Inequality: the Role of Extensive and Intensive Margins

Author

Listed:
  • Paul Hubert

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Frédérique Savignac

    (Banque de France - Banque de France - Banque de France)

Abstract

Using French matched administrative-survey data, we quantify the distributional effects of monetary policy on labor income and decompose the extensive and intensive margins of these effects. We find that the effects of ECB monetary policy shocks on labor income are U-shaped along the labor income distribution. These effects are driven by the extensive margin (transitions out or to unemployment) at the bottom of the distribution and by the intensive margin (labor income changes for individuals continuously employed) at the top. We document that sectoral heterogeneity, especially related to the labor force composition, is crucial in explaining these heterogeneous effects.

Suggested Citation

  • Paul Hubert & Frédérique Savignac, 2023. "Monetary Policy and Labor Income Inequality: the Role of Extensive and Intensive Margins," SciencePo Working papers Main hal-04524715, HAL.
    • Handle: RePEc:hal:spmain:hal-04524715
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04524715
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