Macroeconomic Stability and Wage Inequality: A Model with Credit and Labor Market Frictions
While macroeconomic volatility in the US economy decreased since the early 1980's, individual earnings volatility and wage inequality increased. This paper argues that increasing financial development can contribute to both changes. I develop a real business cycle model with sectoral productivity shocks and labor as well as credit market frictions. Credit market frictions take the form of collateral-based credit constraints. It is shown that there are interactions between the labor and the credit market that matter for the development of wages and output. When workers are not perfectly mobile between sectors, financial development comes along with an increase in the volatility of individual earnings and in wage inequality, although aggregate output volatility is lower.
|Date of creation:||30 Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.wiwi.uni-konstanz.de/fb
More information through EDIRC
|Order Information:||Web: http://www.wiwi.uni-konstanz.de/fb|
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.:
- Costas Azariadis & Leo Kaas, 2009.
"Capital misallocation and aggregate factor productivity,"
2009-028, Federal Reserve Bank of St. Louis.
- Leo Kaas & Costas Azariadis, 2009. "Capital misallocation and aggregate factor productivity," 2009 Meeting Papers 953, Society for Economic Dynamics.
- Azariadis, Costas & Kaas, Leo, 2009. "Capital misallocation and aggregate factor productivity," MPRA Paper 15742, University Library of Munich, Germany.
- Costas Azariadis & Leo Kaas, 2012. "Capital misallocation and aggregate factor productivity," Working Papers 2012-046, Federal Reserve Bank of St. Louis.
- Costas Azariadis & Leo Kaas, 2010. "Capital Misallocation and Aggregate Factor Productivity," Working Paper Series 39_10, The Rimini Centre for Economic Analysis.
- Nicolas Petrosky-Nadeau & Etienne Wasmer, .
"The cyclical volatility of labor markets under frictional financial markets,"
GSIA Working Papers
2010-E1, Carnegie Mellon University, Tepper School of Business.
- Nicolas Petrosky-Nadeau & Etienne Wasmer, 2013. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 193-221, January.
- Petrosky-Nadeau, Nicolas & Wasmer, Etienne, 2010. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," IZA Discussion Papers 5131, Institute for the Study of Labor (IZA).
- Nicolas Petrovsky-Nadeau & Etienne Wasmer, 2010. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.
- Gueorgui Kambourov & Iourii Manovskii, 2009.
"Occupational Mobility and Wage Inequality,"
Review of Economic Studies,
Oxford University Press, vol. 76(2), pages 731-759.
- Cevdet Denizer & Murat F. Lyigun & Ann L. Owen, 2000.
"Finance and macroeconomic volatility,"
International Finance Discussion Papers
670, Board of Governors of the Federal Reserve System (U.S.).
- Dromel, Nicolas & Kolakez, Elie & Lehmann, Etienne, 2009.
"Credit Constraints and the Persistence of Unemployment,"
IZA Discussion Papers
4501, Institute for the Study of Labor (IZA).
- Dromel, Nicolas L. & Kolakez, Elie & Lehmann, Etienne, 2010. "Credit constraints and the persistence of unemployment," Labour Economics, Elsevier, vol. 17(5), pages 823-834, October.
- Nicolas Dromel & Elie Kolakez & Etienne Lehmann, 2009. "Credit Constraints and the Persistence of Unemployment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00389762, HAL.
- Michal Jerzmanowski & Malhar Nabar, 2013.
"Financial Development And Wage Inequality: Theory And Evidence,"
Western Economic Association International, vol. 51(1), pages 211-234, 01.
- Jerzmanowski, Michal & Nabar, Malhar, 2008. "Financial Development and Wage Inequality: Theory and Evidence," MPRA Paper 9841, University Library of Munich, Germany.
- Nicolas Petrosky-Nadeau, 2009.
"Credit, Vacancies and Unemployment Fluctuations,"
GSIA Working Papers
2009-E27, Carnegie Mellon University, Tepper School of Business.
- Leo Kaas, 2009. "Firm volatility and credit: a macroeconomic analysis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 95-106.
When requesting a correction, please mention this item's handle: RePEc:knz:dpteco:1138. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gundula Hadjiani)
If references are entirely missing, you can add them using this form.