Understanding the dynamics of labor shares and inflation

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dc.contributor.author Whelan, Karl
dc.contributor.author Lawless, Martina en
dc.date.accessioned 2008-06-10T16:21:05Z
dc.date.available 2008-06-10T16:21:05Z
dc.date.copyright 2007 Copyright Central Bank of Ireland en
dc.date.issued 2007-05
dc.identifier.uri http://hdl.handle.net/10197/220
dc.description.abstract Calvo-style models of nominal rigidities currently provide the dominant paradigm for understanding the linkages between wage and price dynamics. Recent empirical implementations stress the idea that these models link inflation to the behavior of the labour share of income. Galí, Gertler, and Lopez-Salido (2001) argue that the model explains the combination of declining inflation and labour shares in Euro area. In this paper, we show that with realistic parameters, the canonical Calvo-style model cannot explain this outcome. In addition, we show that the model fails very badly in sectoral data. We examine the elements underlying the decline in the labour share in Europe, and conclude that the key factors are related to technological and labour market developments not accounted for in the standard New-Keynesian framework. en
dc.format.extent 4304 bytes
dc.format.mimetype application/pdf
dc.language.iso en en
dc.publisher Central Bank of Ireland en
dc.relation.ispartofseries Central Bank of Ireland Research Technical Paper en
dc.relation.ispartofseries 4/RT/07 en
dc.subject Labour Share en
dc.subject Phillips Curve en
dc.subject Sectoral Data en
dc.subject.classification E31 en
dc.subject.lcsh Labor market--Europe en
dc.subject.lcsh Inflation (Finance)--Mathematical models en
dc.title Understanding the dynamics of labor shares and inflation en
dc.type Technical Report en
dc.internal.authorurl Karl Whelan (web page) en
dc.internal.authorurl http://www.karlwhelan.com/ en
dc.internal.authorcontactother Email: karl.whelan@ucd.ie; Tel: 353 1 716 8239 en
dc.internal.authorid UCD0026 en
dc.internal.availability Full text available en
dc.internal.webversions https://www.centralbank.ie/data/TechPaperFiles/4RT07.pdf en
dc.status Not peer reviewed en
dc.neeo.contributor Lawless|Martina|aut|
dc.neeo.contributor Whelan|Karl|aut|UCD0026

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