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on Labor Markets - Supply, Demand, and Wages |
| By: | Carolin Linckh; Caroline Neuber-Pohl; Harald Pfeifer |
| Abstract: | This study examines the employment effects of raising the minimum wages for underage apprentices in Germany. To estimate our effects, we exploit age-, sector-, and state-level variations of negotiated minimum wage increases within a triple difference framework. Using a full sample of apprenticeship contracts, we find negative employment effects, as the number of training contracts for underage apprentices decreases significantly due to the minimum wage adjustments. Furthermore, we find that the negative employment effect increases with the size of the minimum wage adjustments. The effects are mainly driven by a reduction in contracts for low-qualified training applicants and for sectors where firms mainly follow a substitution- rather than an investment-oriented training strategy. |
| Keywords: | Minimum wage, Apprenticeship market, Collective bargaining |
| JEL: | J31 J23 J38 J51 J2 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:iso:educat:0202&r=lma |
| By: | Hamed Markazi Moghadam; Patrick A. Puhani; Joanna Tyrowicz |
| Abstract: | To determine how wives’ and husbands’ retirement options affect their spouses’ (and their own) labour supply decisions, we exploit (early) retirement cutoffs by way of a regression discontinuity design. Several German pension reforms since the early 1990s have gradually raised women’s retirement age from 60 to 65, but also increased ages for several early retirement pathways affecting both sexes. We use German Socio-Economic Panel data for a sample of couples aged 50 to 69 whose retirement eligibility occurred (i) prior to the reforms, (ii) during the transition years, and (iii) after the major set of reforms. We find that, prior to the reforms, when several retirement options were available to both husbands and wives, both react almost symmetrically to their spouse reaching an early retirement age, that is both husband and wife decrease their labour supply by about 5 percentage points when the spouse reaches age 60). This speaks in favour of leisure complementarities. However, after the set of reforms, when retiring early was much more difficult, we find no more significant labour supply reaction to the spouse reaching a retirement age, whereas reaching one’s own retirement age still triggers a significant reaction in labour supply. Our results may explain some of the diverse findings in the literature on asymmetric reactions between husbands and wives to their spouse reaching a retirement age: such reactions may in large parts depend on how flexibly workers are able to retire. |
| Keywords: | retirement coordination; labour market participation; household decisions; regression discontinuity design |
| JEL: | J22 J26 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1187&r=lma |
| By: | Dinara Alpysbayeva (Norwegian University of Life Sciences, School of Economics and Business); Galiya Sagyndykova (Nazarbayev University, School of Sciences and Humanities); Aigerim Yergabulova (Nazarbayev University, Graduate School of Business) |
| Abstract: | Despite significant progress in gender equality over the past decades, women's access to equal pay is still a persistent and complex issue. Recent research on the gender pay gap in foreign-owned companies has illuminated the possible effects of foreign ownership on the gender wage gap, emphasizing the significance of addressing this problem for advancing gender equality in the context of global trade and economic growth. This paper examines the gender pay gap in Kazakhstan, with a focus on the impact of foreign ownership and the gender-occupational composition of firms. The study aims to identify the underlying sources of the gender pay gap and whether it can be attributed to either wage discrimination or productivity differences, and how the institutional background of Kazakhstan may influence this issue. Our primary estimation technique throughout the analysis is the reduced-form linear probability model. We show that the gender pay gap is higher in foreign-owned firms, especially for managerial positions. Interestingly, our findings align with distinct sources of the disparity in foreign-owned firms and domestic firms. For foreign-owned firms, we find a gender wage gap only in management positions, consistent with a wage gap driven by work requirements that disproportionately impact women in career advancement. For domestic-owned firms, we find a rural versus urban difference in the gender wage gap which indicates discrimination based on traditional gender stereotypes. We do not find any evidence to suggest that the wage disparity is due to productivity differences. Based on our findings, policy measures should include flexible work arrangements that enhance temporal flexibility to reduce the gender pay gap and improve outcomes for female employees. |
| Keywords: | gender pay inequality, occupations, foreign ownership, Kazakhstan |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:asx:nugsbw:2023-08&r=lma |
| By: | Erik Brynjolfsson; John J. Horton; Christos Makridis; Alexandre Mas; Adam Ozimek; Daniel Rock; Hong-Yi TuYe |
| Abstract: | Remote work surged during the Covid pandemic but there is disagreement about the extent of the change. To address this question, we field a new, nationally-representative survey: the Remote Life Survey (RLS). We find that in October 2020, 31.6 percent of the continuously employed workforce always worked from home (WFH) and 21.9 percent sometimes or rarely WFH, totaling 53.5 percent. We compare our results with alternative measurement approaches, with a focus on government surveys, and provide estimates on the impact of four factors: (a) differences among mail versus web-based survey respondents, (b) differences in the inclusion of self-employed workers, (c) the industry mix of the sample, and (d) the exclusion of people who were already remote pre-pandemic. We find that the last explanation (d) explains the bulk of the difference in estimates between the Current Population Survey (CPS) and other measures of remote work, with the CPS underestimating the remote work rate by up to 28 percentage points. Under our preferred estimates, we find that about half of the U.S. workforce worked remotely at least one day each week as of December 2020. |
| JEL: | I15 J21 L23 M15 M5 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31193&r=lma |
| By: | Werner Pena; Christian Siegel |
| Abstract: | We investigate links between routine-biased technical change, the structure of occupational employment, and cross-country income differences. To implement this, we combine several data sources including national labour force surveys and Penn World Tables. We first document that in our novel dataset spanning 92 countries there is a negative relationship between the employment share of routine occupations and GDP per hour worked. We then conduct a development accounting exercise where we differentiate labour inputs by occupation and allow for occupationspecific technologies. We find a systematic relationship between occupation-specific technologies and GDP per hour worked. More developed economies use technologies that are more routine-biased. The productivity of routine labour is about 11 times higher in the top 25 percent than in the bottom 25 percent of countries ranked by GDP per hour worked. International differences in this routine labour technology by themselves account for about 13 percent of the 90-10 ratio of GDP per hour worked, whereas differences in abstract labour technology do not contribute to the observed GDP dispersion. Eliminating all occupations’ and capital’s technology differences across the world would compress the GDP distribution by 35 to 41 percent. |
| Keywords: | biased technical change; employment structure; income differences; development accounting |
| JEL: | O10 O33 O41 J21 J24 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:2301&r=lma |
| By: | Richard V. Burkhauser; Drew McNichols; Joseph J. Sabia |
| Abstract: | Advocates of minimum wage increases have long touted their potential to reduce poverty. This study assesses this claim. Using data spanning nearly four decades from the March Current Population Survey, and a dynamic difference-in-differences approach, we find that a 10 percent increase in the minimum wage is associated with a (statistically insignificant) 0.17 percent increase in the probability of longer-run poverty among all persons. With 95% confidence, we can rule out long-run poverty elasticities with respect to the minimum wage of less than -0.129, which includes central poverty elasticities reported by Dube (2019). Prior evidence suggesting large poverty-reducing effects of the minimum wage are (i) highly sensitive to researcher’s choice of macroeconomic controls, and (ii) driven by specifications that limit counterfactuals to geographically proximate states (“close controls”), which poorly match treatment states’ pre-treatment poverty trends. Moreover, an examination of the post-Great Recession era — which saw frequent, large increases in state minimum wages — failed to uncover poverty-reducing effects of the minimum wage across a wide set of specifications. Finally, we find that less than 10 percent of workers who would be affected by a newly proposed $15 federal minimum wage live in poor families. |
| JEL: | J23 J38 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31182&r=lma |
| By: | Zoltan Elekes; Gergo Toth; Rikard Eriksson |
| Abstract: | This paper explores how the network structure of local inter-industry labour flows relates to regional economic resilience across 72 local labour markets in Sweden. Drawing on recent advancements in network science we stress-test these networks against the sequential elimination of their nodes, finding substantial heterogeneity in network robustness across regions. Regression analysis with LASSO selection in the context of the 2008 crisis indicates that labour flow network robustness is a prominent structural predictor of employment change during crisis. These findings elaborate on how variation in the self-organisation of regional economies as complex systems makes for more or less resilient regions. |
| Keywords: | local capability base; inter-industry labour flows; skill-relatedness; network robustness; regional economic resilience; regional employment |
| JEL: | J21 L14 R11 R23 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2311&r=lma |
| By: | Robert D. Metcalfe; Alexandre B. Sollaci; Chad Syverson |
| Abstract: | Across many sectors, research has established that management explains a notable portion of productivity differences across organizations. A remaining question, however, is whether it is managers themselves or firm-wide management practices that matter. We shed light on this question by analyzing store-level data from two multibillion-dollar retail companies. In this setting, managers move between stores but management practices are set by firm policy and largely fixed, allowing us to hone in on managers’ personal roles in determining store performance. We find: (i) managers affect and explain a large share of the variance of store-level productivity; (ii) negative assortative matching between managers and stores, which may reflect both firms’ decisions and a selection-driven bias that we characterize and argue might apply in other settings using movers designs; (iii) managers who move do so on average from less productive to more productive stores; (iv) female managers are less likely to move stores than male managers; (v) manager quality is generally hard to explain with the observables in our data, but is correlated with the ratio of full-time to part-time workers; (vi) managers who obtain high labor productivity also tend to obtain high energy productivity, revealing some breadth in managers’ skills applicability; (vii) high-performing managers in stable growth times are also high-performing during turbulent times; and (viii) exogenous productivity shocks improve the quality of initially low quality managers, suggesting managers can learn. We explain implications of these findings for productivity research. |
| JEL: | D20 L2 M5 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31192&r=lma |
| By: | Sören Blomquist; Anil Kumar; Che-Yuan Liang; Whitney Newey |
| Abstract: | This paper is about the nonparametric regression of a choice variable on a nonlinear budget set under utility maximization with general heterogeneity, i.e. in the random utility model (RUM). We show that utility maximization and convex budget sets make this regression three dimensional with a more parsimonious specification than previously derived. We show that nonconvexities in the budget set will have little effect on these results in important cases. We characterize all the restrictions of utility maximization on the budget set regression and show how to check these restrictions in applications. We formulate budget set effects that can be identified by this regression and give automatic debiased machine learners of these effects. We consider use of control functions to allow for endogeneity. Throughout we take as the main example the effect of taxes on taxable income including accounting for productivity growth. In an application to Swedish data we find the taxable income elasticity of a change in the slope of each segment to be .52, that the regression satisfies the restrictions of utility maximization at the values chosen for over 95% of observations, and that a productivity growth rate we estimate is close to other estimates. |
| JEL: | C14 C24 H31 J22 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31194&r=lma |
| By: | Andres García-Suaza; Fernando Jaramillo; Marlon Salazar |
| Abstract: | Developing countries have a vast informal sector generally associated with low productivity levels. The response of informal employment to tax policies might depend on labor market rigidities. This paper proposes a theoretical framework consisting of a search and matching model with segmentation in the labor market to understand how tax policies and enforcement interact to determine the size of the formal sector. The analytical results show that decreasing payroll taxes increases formal employment demand, and enforcement expenditure decreases informal employment offers. The model suggests that a tax policy combination leads to a significant impact on informality reduction. Moreover, the magnitude of the effect of tax policies depends on real wage rigidities, i.e., when the economy faces high real wage rigidities, the tax policies have a higher effect on informality reduction |
| Keywords: | Informality, payroll taxes, fiscal policy, enforcement, search frictions, shirking, developing countries. |
| JEL: | E26 E62 J21 J46 J31 O17 K42 |
| Date: | 2023–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:020744&r=lma |
| By: | Inga Laß (Federal Institute for Population Research (BiB), Wiesbaden, Germany); Esperanza Vera-Toscano (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Mark Wooden (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne) |
| Abstract: | This paper examines the impact of the growth in the incidence of working from home during the COVID-19 pandemic on workers’ job satisfaction. Using longitudinal data collected in 2019 and 2021 as part of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, fixed-effects models of job satisfaction are estimated. Changes in the share of total weekly work hours usually worked from home are not found to have any significant association with changes in job satisfaction for men. In contrast, a strong significant positive (but non-linear) association is found for women, and this relationship is concentrated on women with children. These findings suggest the main benefit of working from home for workers arises from the improved ability to combine work and family responsibilities, something that matters more to women given they continue to shoulder most of the responsibility for house and care work. |
| Keywords: | working from home, job satisfaction, COVID-19 pandemic, HILDA Survey |
| JEL: | J22 J28 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2023n04&r=lma |
| By: | Leo Azzollini; Richard Breen; Brian Nolan |
| Abstract: | Many studies have focused on how demographic dynamics, such as changes in marriage patterns and the increasing share of households headed by a single adult, may contribute to rising earnings inequality. Here we instead ask how demographic differences between countries may underpin differences in household earnings inequality between them, concentrating on economic homogamy and the proportion of households headed by a single woman and by a single man. We use data on 28 OECD countries from the 2016 wave of the Luxembourg Income Study, and develop a new inequality decomposition approach based on half the squared coefficient of variation (HSCV). We find that variation between countries in the specified demographic factors can account for just above 40% of the variation between countries in inequality in household labour earnings, with the proportion of households headed by a single woman playing the largest role. The associations between labour earnings inequality and these demographic components are consistent across countries, with little variation in how each is related to overall inequality. Although by far the largest driver of cross-national inequality relates to the earnings of partnered men, counterfactual analysis suggests that relatively small changes in these demographic variables can indeed affect inequality. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:lis:liswps:856&r=lma |
| By: | Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw); Zuzana Zavarská (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Specialisation in value-chain functions is one of the new phenomena introduced by global value chains (GVCs). This report investigates the effects of functional specialisation on labour markets in fabrication and R&D activities as the two polar cases of value-chain functions, whereby the former is associated with factory economies, while the latter is characteristic of headquarter economies. More precisely, a metric similar to revealed comparative advantage is used to study the effect of relative functional specialisation on wages and non-wage working conditions. In line with the GVC literature emphasising power relations and organisational aspects of production networks, we are able to identify differentiated effects for functional specialisation patterns on wages in EU member states at the industry level across time. While relative functional specialisation in fabrication tends to hold back wages, functional specialisation in R&D has a positive effect on wage progression, controlling for labour productivity, GVC participation and numerous labour supply- and labour demand-side factors. The use of a constructed ‘sharp’ instrument allows giving these results a causal interpretation. Conversely, both functional specialisation measures are found to improve some non-wage working conditions, namely workers’ physical environment and their work intensity, which is evidence against a potential ‘race to the bottom’ effect of functional specialisation along GVCs. The effect is stronger for relative specialisation in fabrication than for relative specialisation in R&D. |
| Keywords: | Functional specialisation, wages, non-wage working conditions, global value chains |
| JEL: | F15 F21 F23 F63 J31 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:227&r=lma |
| By: | John Edward Sabelhaus; Jeffrey P. Thompson |
| Abstract: | Transfers of wealth between generations—whether through inheritances or inter vivos gifts—are less important in explaining racial disparities in wealth than might be expected. While this factor looms large in the media’s discussions of racial inequality, it explains relatively little of the disparities evident in the data. One reason is that most people, regardless of race, receive no inheritance or other transfer of substantial value. In addition, most recipients of inheritances ultimately consume those bequests and do not plan to leave substantial gifts to their offspring. Further, the assets that account for a large majority of most households’ wealth (employment-based retirement plans and home equity) are not inherited and accumulate slowly over families’ working lives. Using nonparametric decomposition techniques, we show that intergenerational transfers explain only a modest portion of the disparities between white and non-white families. This finding is consistent with prior research, but we improve upon the existing literature in a variety of ways, including augmenting the wealth measure in the Survey of Consumer Finances to account for the value of defined benefit pensions, adding controls for lifetime earnings and the availability and generosity of employer-provided pensions, and capturing some inheritances and inter vivos transfers that are not typically reflected in most studies. When no other controls are included, we find that differences in intergenerational transfers account for 13 to 16 percent of white/non-white private wealth gaps. When we control for lifetime earnings, workplace pensions, and a handful of additional human capital variables, the marginal contribution of intergenerational transfers shrinks considerably, but the combined portion of the racial wealth gap that is explained rises to 80 to 90 percent. Policymakers interested in helping households build wealth are advised to look to ways that would enable them to boost the earnings that they receive over their lifetime. |
| Keywords: | racial wealth gap; inequality; human capital; lifetime earnings; retirement plans; pensions; inheritance |
| JEL: | D14 D31 D63 J15 J24 J32 |
| Date: | 2023–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:95748&r=lma |
| By: | José Pulido; Hernando Vargas-Herrera; Juan J. Ospina-Tejeiro |
| Abstract: | We provide an overview of the primary structural features of the labor market in Colombia and survey the margins of adjustment of the market during the pandemic. Given the decline of real wages amid the post-pandemic inflationary surge, mainly due to the formal wage rigidity in the short run, we investigate whether the dynamics of nominal wages and their expected adjustments to catch up with prices could fuel the post-pandemic inflationary escalation. For this, we estimate the long-term relationship between wages, prices, and labor productivity using a small open economy framework. We find that up until the third quarter of 2022, wages were not among the primary drivers of the observed inflation escalation. However, wages have typically contributed to restoring long-run equilibrium. Thus, their adjustment towards equilibrium, which can occur through indexation, could imply risks for the convergence of inflation to the target. These risks are significant if the observed sources of the inflationary surge persist. **** RESUMEN: Examinamos las principales características estructurales del mercado laboral en Colombia y sus márgenes de ajuste durante la pandemia. Dada la caída de los salarios reales en medio del brote inflacionario que ocasionó la pandemia, debido a la poca capacidad de los salarios nominales para ajustarse en el corto plazo, evaluamos si la dinámica observada y prevista de los salarios nominales para compensar los ajustes en los precios puede retroalimentar la escalada inflacionaria. Para ello, estimamos la relación de largo plazo entre precios, salarios y productividad laboral utilizando un marco de economía pequeña y abierta. Encontramos que, hasta el tercer trimestre de 2022, los salarios no estuvieron entre los principales impulsores de la escalada inflacionaria. Sin embargo, los salarios típicamente han contribuido a restaurar el equilibrio a largo plazo. Por lo tanto, su ajuste hacia el equilibrio, que puede ocurrir a través de la indexación, podría implicar riesgos para la convergencia de la inflación a la meta. Estos riesgos son significativos si persisten las fuentes observadas del brote inflacionario. |
| Keywords: | Labor market, employment, wages, prices, pandemic, Mercado laboral, empleo, salarios, precios, pandemia |
| JEL: | E24 E31 J30 O54 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1232&r=lma |
| By: | Robert Kaestner; Luis F. Faundez |
| Abstract: | This article describes a conceptual and empirical approach for estimating a human capital production function of child development that incorporates mother- or child-fixed effects. The use of mother- or child-fixed effects is common in this applied economics literature, but its application is often inconsistent with human capital theory. We outline the problem and demonstrate its empirical importance with an analysis of the effect of Head Start and preschool on child and adult outcomes. The empirical specification we develop has broad implications for a variety of applied microeconomic analyses beyond our specific application Results of our analysis indicate that attending Head Start or preschool had no economically or statistically significant effect on child or adult outcomes. |
| JEL: | J13 J24 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31199&r=lma |
| By: | Gielen, Anne C. (Erasmus University Rotterdam); Webbink, Dinand (Erasmus University Rotterdam) |
| Abstract: | A ban on migration from Suriname, a former Dutch colony, to the Netherlands induced a mass migration and changed the selection of migrants. We exploit this historical episode to study the relationship between the self-selection of migrants and their long-term economic integration over three generations. 'Beat-the-ban' migrants, those arriving just before the ban, are negatively selected compared to economic migrants arriving earlier. This difference in selection is reflected in the outcomes of the first generation. However, the inequality in outcomes between differently selected migrants is not persistent. The offspring of negatively selected migrants has a faster catch-up to natives which can be explained by inequities in the country of origin. |
| Keywords: | mass migration, economic integration, intergenerational mobility, migrant selection |
| JEL: | J24 J6 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16065&r=lma |
| By: | LECHEVALIER, Sébastien; MOFAKHAMI, Malo |
| Abstract: | What is the impact of digitalization on job quality? While the literature has mainly focused on the effects on performance and volume of employment, it has relatively neglected the qualitative issues, including when the existence of a digital divide is discussed. This paper tries to fill the gap through a comparative analysis of the diverse impacts of digital use on work organization and job satisfaction in Japan and France, two comparable countries with distinctive features regarding both digital use and work. To do so, we propose a simplified mediation model that synthesizes the different relations at stake. Our results can be summarized as follows. First, we did not find overall substantial differences between the two countries regarding the impact of digital use on job quality. Second, we find no direct effect of digital use on job satisfaction. However, digital use is correlated to some work organization practices, through which it has positive mediated effects. Third, the most massive source of the digital divide is, in both countries, related to the absence of digital skills. We also find other sources of individual heterogeneity, for which the patterns are different between the two countries. |
| Keywords: | Digital use, Job quality, Job satisfaction, Work organization, New technology adoption, Comparative analysis |
| JEL: | J28 O33 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:740&r=lma |
| By: | Sarah Cattan (Institute for Fiscal Studies); Kjell G. Salvanes (Norwegian School of Economics); Emma Tominey (University of York) |
| Abstract: | High school students from non-elite backgrounds are less likely to have peers with elite educated parents than their elite counterparts in Norway. We show this difference in social capital is a key driver of the high intergenerational persistence in elite education. We identify a positive elite peer effect on enrolment in elite programmes and disentangle underlying mechanisms. Exploiting a lottery in the assessment system, a causal mediation analysis shows the overall positive peer effect reflects a positive effect on application behaviour (conditional on GPA), which dominates a negative effect on student GPA. We consider implications for income mobility finding that encouraging further mixing between elite and non-elite students in high school could improve mobility across the whole distribution. |
| Keywords: | Peers, Elite university, Subject choice, Social mobility, Teacher bias |
| JEL: | I24 J24 J62 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ucl:cepeow:23-04&r=lma |
| By: | Bichler, Shimshon; Nitzan, Jonathan |
| Abstract: | This paper is part of a dialogue with Blair Fix on how inflation redistributes income between creditors and workers and the way in which monetary policy affects this process. In his 2023 paper, ‘Inflation! The Battle Between Creditors and Workers’, Fix shows, first, that the impact of U.S. inflation on creditor-worker distribution has been historically contingent (favouring workers during some periods and creditors in others); and second, that since the 1970s, Fed policy to combat inflation with higher interest rates boosted the yield of creditors relative to the wage rate of workers. Our own research suggests that these conclusions might be too general. We point out that creditors are not a monolithic class and that different types of creditors are affected differently, and often inversely, by the rate of interest. We illustrate that, contrary to bank depositors, bondholders tend to lose from inflation. And we show that monetary policy, at least in the United States, appears to follow rather than determine market yields. More generally, since most capitalists nowadays are lenders as well as borrowers, and given that ‘dominant capital’ profits from the full spectrum of investment instruments, we wonder if ‘creditors’ is still a useful category for analysing redistribution in general and inflationary redistribution in particular. |
| Keywords: | Blair Fix, bond yields, creditors, income distribution, inflation, interest rate, monetary policy, total returns, wages |
| JEL: | G12 E5 J3 D3 E5 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:capwps:202301&r=lma |
| By: | Guido Menzio |
| Abstract: | I study a version of the search-theoretic model of imperfect competition by Burdett and Judd (1983) in which sellers face a strictly increasing rather than a constant marginal cost of production. The equilibrium exists and is unique, and its structure depends on the extent of search frictions. If search frictions are large enough, the price distribution is non-degenerate and atomless. If search frictions are neither too large nor too small, the price distribution is non-degenerate with an atom at the lowest price. If search frictions are small enough, the price distribution is degenerate. The equilibrium is efficient if and only if the price distribution is degenerate and, hence, if and only if search frictions are small enough. In contrast, in Burdett and Judd (1983), the equilibrium price distribution is always non-degenerate and atomless and the equilibrium is always efficient. As in Burdett and Judd (1983), the equilibrium goes from monopolistic to competitive as search frictions decline. |
| JEL: | D43 D83 J31 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31174&r=lma |