Bad jobs and low inflation

Arbeitspapier

We study a model in which firms compete to retain and attract workers searching on the job. A drop in the rate of on-the-job search makes such wage competition less likely, reducing expected labor costs and lowering inflation. This model explains why inflation has remained subdued over the last decade, which is a conundrum for general equilibrium models and Phillips curves. Key to this success is the observed slowdown in the recovery of the employment-to-employment transition rate in the last five years, which is interpreted by the model as a decline in the share of employed workers searching for a job. This fall in the on-the-job search rate is corroborated by the micro data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2020-09

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Bargaining Theory; Matching Theory
• Subject: Missing inflation ; job ladder ; cyclical misallocation ; labor market slack ; Phillips curve

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Faccini, Renato ; Melosi, Leonardo
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Chicago
• (where): Chicago, IL
• (when): 2020

Further information

• DOI: doi:10.21033/wp-2020-09
• Handle: http://hdl.handle.net/10419/230387
• Last update: 10.03.2025, 11:43 AM CET