Job-to-job mobility and inflation

Arbeitspapier

The low rate of inflation observed in the U.S. over the past decade is hard to reconcile with traditional measures of labor market slack. We develop a theory-based indicator of interfirm wage competition that can explain the missing inflation. Key to this result is a drop in the rate of on-the-job search, which lowers the intensity of interfirm wage competition to retain or hire workers. We estimate the on-the-job search rate from aggregate labor-market flows and show that its recent drop is corroborated by survey data. During "the great resignation", the indicator of interfirm wage competition rose, raising inflation by around 1 percentage point during most of 2021.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. WP 2023-03

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: Missing inflation ; labor market slack ; Phillips curve ; employment-to-employment rate ; micro data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Faccini, Renato ; Melosi, Leonardo
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Chicago
• (where): Chicago, IL
• (when): 2023

Further information

• DOI: doi:10.21033/wp-2023-03
• Handle: http://hdl.handle.net/10419/272818
• Last update: 12.03.20252025, 3:44 AM CET