The Job Ladder: Inflation vs. Reallocation / Giuseppe Moscarini, Fabien Postel-Vinay.

Format:

Book

Author/Creator:

Moscarini, Giuseppe.

Contributor:

National Bureau of Economic Research.

Postel-Vinay, Fabien.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31466.

NBER working paper series no. w31466

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We introduce on-the-job search frictions in an otherwise standard monetary DSGE New-Keynesian model. Heterogeneity in productivity across jobs gives rise to a job ladder. Firms Bertrand-compete for employed workers according to the Sequential Auctions protocol of Postel-Vinay and Robin (2002). Outside job offers to employed workers, when accepted, reallocate employment up the productivity ladder; when declined, because matched by the current employer, they raise production costs and, due to nominal price rigidities, compress mark-ups, building inflationary pressure. When employment is concentrated at the bottom of the job ladder, typically after recessions, the reallocation effect prevails, aggregate supply expands, moderating marginal costs and inflation. As workers climb the job ladder, reducing slack in the employment pool, the inflation effect takes over. The model generates endogenous cyclical movements in the Neo Classical labor wedge and in the New Keynesian wage mark-up. The economy takes time to absorb cyclical misallocation and features propagation in the response of job creation, unemployment and inflation to aggregate shocks. The ratio between job-finding probabilities from job-to-job and from unemployment, a measure of the "Acceptance rate" of job offers to employed workers, predicts negatively inflation, independently of the unemployment rate.

Notes:

Print version record

July 2023.