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Networks in labor markets and welfare costs of inflation

Author

Listed:
  • Marcelo Arbex

    (Department of Economics, University of Windsor)

  • Dennis O'Dea

    (Department of Economics, University of Washington)

Abstract

We study the welfare costs of inflation in a monetary general equilibrium model with networks in the labor market. Unemployment results when individuals are unsuccessful in hearing about job opportunities, either directly or through their peers. Inflation affects the consumption-leisure choice differently depending on job network structure; inflation hits harder in more connected networks. In these networks, people consume more and enjoy more leisure, leading to higher welfare. Inflation reduces consumption and hurts households more, when labor markets are more effective.

Suggested Citation

  • Marcelo Arbex & Dennis O'Dea, 2014. "Networks in labor markets and welfare costs of inflation," Working Papers 1401, University of Windsor, Department of Economics.
    • Handle: RePEc:wis:wpaper:1401
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Social networks; Labor market frictions; Inflation; Welfare costs of inflation;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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