scholarly journals Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity

2021 ◽  
Vol 13 (2) ◽  
pp. 292-332
Author(s):  
Juan J. Dolado ◽  
Gergő Motyovszki ◽  
Evi Pappa
Keyword(s):  
Monetary Policy ◽  
Labor Market ◽  
Income Inequality ◽  
New Keynesian ◽  
Labor Income ◽  
Skilled Workers ◽  
Investment Demand ◽  
Multiplier Effect ◽  
Distributional Consequences ◽  
Amplification Mechanism

We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high-skilled and less-skilled workers. To rationalize these findings, we build a New Keynesian DSGE model with asymmetric search-and-matching (SAM) frictions and capital-skill complementarity (CSC) in production. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. (JEL E32, E52, E24, E12, E25, J63)

THE DRIVERS OF LABOR INCOME INEQUALITY — A LITERATURE REVIEW

2013 ◽  
Vol 04 (01) ◽  
pp. 1350004 ◽  
Author(s):  
RAFAL KIERZENKOWSKI ◽  
ISABELL KOSKE
Keyword(s):  
Labor Market ◽  
Income Inequality ◽  
Literature Review ◽  
General Trend ◽  
Labor Income ◽  
Labor Market Policies ◽  
Biased Technological Change ◽  
Key Drivers ◽  
Main Determinants

Despite a general trend of increasing labor income inequality, there have been differences in the timing, intensity and even direction of these changes across OECD countries. These stylized facts have led to numerous studies about the main determinants of labor income inequality and, as a result, a significant revision of the previous consensus about the key drivers. The most researched channels include skill-biased technological change, international trade, immigration, education as well as the role of labor market policies and institutions.

scholarly journals Structural Changes in Investment and the Waning Power of Monetary Policy

2021 ◽  
Author(s):  
Justin Bloesch ◽  
Jacob P. Weber
Keyword(s):  
Monetary Policy ◽  
Open Economy ◽  
Structural Changes ◽  
Small Open Economy ◽  
Value Added ◽  
New Keynesian ◽  
Secular Change ◽  
Labor Income ◽  
Labor Earnings ◽  
Investment Goods

We argue that secular change in both the production and composition of investment goods has weakened private investment's role in the transmission of monetary policy to labor earnings and consumption. We show analytically that fluctuations in the production of investment goods amplify the response of consumption to monetary policy shocks by varying labor income for hand-to-mouth agents. We document three secular changes that weaken this channel: (i) labor's share of value added in investment goods production has declined, (ii) the import share of investment goods has risen, and (iii) the composition of investment has shifted towards components that are less responsive to monetary policy. A small open economy, two agent New Keynesian model calibrated to match these facts implies a 38% and 26% weaker response of labor income and aggregate consumption, respectively, to real interest rate shocks in a 2010's economy relative to a 1960's economy.

scholarly journals Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment

2010 ◽  
Vol 2 (2) ◽  
pp. 1-30 ◽  
Author(s):  
Olivier Blanchard ◽  
Jordi Galí
Keyword(s):  
Monetary Policy ◽  
Labor Market ◽  
Labor Markets ◽  
New Keynesian ◽  
Price Setting ◽  
Efficient Allocation ◽  
New Keynesian Model ◽  
Optimal Monetary Policy ◽  
Productivity Shocks ◽  
Keynesian Model

We construct a utility-based model of fluctuations with nominal rigidities and unemployment. We first show that under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. That property is also shown to hold, despite labor market frictions, in the decentralized equilibrium under flexible prices and wages. Inefficient unemployment fluctuations arise when we introduce real-wage rigidities. As a result, in the presence of staggered price setting by firms, the central bank faces a trade-off between inflation and unemployment stabilization, which depends on labor market characteristics. We draw the implications for optimal monetary policy. (JEL E12, E24, E52)

scholarly journals The Redistributive Effects of Monetary Policy Across Generations

2018 ◽  
pp. 44-60 ◽  
Author(s):  
Olga Bondarenko
Keyword(s):  
Monetary Policy ◽  
Overlapping Generations ◽  
Income Group ◽  
New Keynesian ◽  
Labor Income ◽  
Monetary Shocks ◽  
Olg Model ◽  
Debt Accumulation ◽  
Policy Transmission ◽  
Redistributive Effects

The paper revises the redistributive channels of monetary policy transmission and their impact on income and wealth distributions in a New-Keynesian Overlapping Generations (OLG) model. The model mimics total asset holdings and earnings processes of several types of households across generations, based on their attitude to saving and income group. In this environment, expansionary monetary shocks stimulate capital and debt accumulation to a larger extent for middle-aged individuals, contributing to intergenerational inequality. Heterogeneity of labor income augments this effect, benefitting richer and more productive workers.

Shortage of Skills in the Labor Market: Limited Supply, Lack of Demand, or False Signals from Employers?

2004 ◽  
pp. 76-94 ◽  
Author(s):  
V. Gimpelson
Keyword(s):  
Labor Market ◽  
Competitive Market ◽  
Skilled Workers ◽  
Industrial Enterprises ◽  
Russian Industry ◽  
General Skills ◽  
Limited Supply

The article discusses the issue of shortage of skills in the Russian industry. Using microdata from a survey of industrial enterprises, the author confirms that most of employers complain of difficulties in hiring and attaching skilled workers. In case of mass occupations, this shortage relates mostly to low efficient enterprises, which are unable or unwilling to pay competitive market going wage. More efficient and better paying firms are less likely to face shortage of general skills on the labor market but may face limited supply of specific skills.

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