Premium
LABOR SUPPLY FACTORS AND ECONOMIC FLUCTUATIONS
Author(s) -
Foroni Claudia,
Furlanetto Francesco,
Lepetit Antoine
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12311
Subject(s) - economics , unemployment , autoregressive model , identification (biology) , wage , structural vector autoregression , wage bargaining , unemployment rate , new keynesian economics , supply shock , sign (mathematics) , econometrics , labour economics , macroeconomics , monetary policy , mathematical analysis , botany , mathematics , biology
We propose a new Vector Autoregressive identification scheme that enables us to disentangle labor supply shocks from wage bargaining shocks. Identification is achieved by imposing sign restrictions on the responses of the unemployment rate and the labor force participation rate to the two shocks. According to our analysis on United States data over the period 1985–2014, labor supply shocks and wage bargaining shocks are important drivers of output and unemployment both in the short run and in the long run. These results suggest that identification strategies used in estimated new Keynesian models to disentangle labor market shocks may be misguided.
Accelerating Research
Robert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom
Address
John Eccles HouseRobert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom