{"title":"Job-to-Job Mobility and Inflation","authors":"Renato Faccini, Leonardo Melosi","doi":"10.1162/rest_a_01312","DOIUrl":null,"url":null,"abstract":"Abstract 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”, interfirm-wage competition rose, raising inflation by around 1 percentage point in 2021.","PeriodicalId":275408,"journal":{"name":"The Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2023-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The Review of Economics and Statistics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1162/rest_a_01312","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
Abstract 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”, interfirm-wage competition rose, raising inflation by around 1 percentage point in 2021.
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