Recent U.S. evidence suggests that the response of labor share to a productivity shock is characterized by countercyclicality and overshooting. These findings cannot be reconciled easily with existing business cycle models. We extend the Diamond-Mortensen-Pissarides model of search in the labor market by considering strategic interactions among an endogenous number of producers, which leads to countercyclical price markups. Although Nash bargaining delivers a countercyclical labor share, we show that countercyclical markups are fundamental to address the overshooting. On the contrary, we find that real wage rigidity does not seem to play a crucial role in the dynamics of the labor share of income.

Colciago, A., & Rossi, L. (2015). Firm Dynamics, Endogenous Markups, and the Labor Share of Income. MACROECONOMIC DYNAMICS, 19(6), 1309-1331 [10.1017/S1365100513000849].

Firm Dynamics, Endogenous Markups, and the Labor Share of Income

COLCIAGO, ANDREA
;
2015

Abstract

Recent U.S. evidence suggests that the response of labor share to a productivity shock is characterized by countercyclicality and overshooting. These findings cannot be reconciled easily with existing business cycle models. We extend the Diamond-Mortensen-Pissarides model of search in the labor market by considering strategic interactions among an endogenous number of producers, which leads to countercyclical price markups. Although Nash bargaining delivers a countercyclical labor share, we show that countercyclical markups are fundamental to address the overshooting. On the contrary, we find that real wage rigidity does not seem to play a crucial role in the dynamics of the labor share of income.
No
Articolo in rivista - Articolo scientifico
Scientifica
Labor Share Overshooting, Endogenous Market Structures, Search and Matching Frictions
English
1309
1331
23
Colciago, A., & Rossi, L. (2015). Firm Dynamics, Endogenous Markups, and the Labor Share of Income. MACROECONOMIC DYNAMICS, 19(6), 1309-1331 [10.1017/S1365100513000849].
Colciago, A; Rossi, L
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/62642
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