Bargaining Shocks and Aggregate Fluctuations / Thorsten Drautzburg, Jesús Fernández-Villaverde, Pablo Guerrón-Quintana.

Format:

Book

Author/Creator:

Drautzburg, Thorsten.

Contributor:

National Bureau of Economic Research.

Fernández-Villaverde, Jesús.

Guerrón-Quintana, Pablo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23647.

NBER working paper series no. w23647

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We argue that social and political risk causes significant aggregate fluctuations by changing workers' bargaining power. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks trigger output and unemployment movements. To quantify the aggregate importance of these distribution shocks, we extend an otherwise standard neoclassical growth economy. We model distribution shocks as exogenous changes in workers' bargaining power in a labor market with search and matching. We calibrate our economy to the U.S. corporate non-financial business sector, and we back out the evolution of workers' bargaining power. We show how the estimated shocks agree with the historical narrative evidence. We document that bargaining shocks account for 28% of aggregate fluctuations and have a welfare cost of 2.4% in consumption units.

Notes:

Print version record

August 2017.