Wage Bargaining, Job Matching, and the Great Depression

Transcription

1 Wage Bargaining, Job Maching, and he Grea Depression Chris Reicher UC San Diego May 2008

2 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Oupu, employmen (% of rend): % 100% 90% 80% 70% 60% 50% Recessions Real GNP Employmen

3 Wage Bargaining, Job Maching, and he Grea Depression January 2008 The role of labor policy? Bernsein (1963): 1920s lean years for workers. Gielman (1992): Ani-union policies, welfare capialism, company unions. Railway Labor Ac, Norris-LaGuardia Ac, cour cases. Barber (1985), Kennedy (1999), Hoover (1952): Hoover s policies and views on wages vs. FDR. Trade union densiy: 9.6% in 1928 vs. 20.7% in 1939.

4 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Labor s share of gross income, % 55% 75% 50% 70% 45% 65% 40% Corporae GDP Privae

5 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Vacancies, employmen (% of rend), % 200% 150% 100% 50% Vacancies (% of rend) 0% 105% 100% 95% 90% 85% 80% 75% 70% 65% Employmen (% of rend) 1923.I hrough 1929.I 1929.I hrough 1941.IV

6 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Prices, money sock (% of rend), % 110% 100% 90% 80% 70% 60% 50% Recessions Price Level Money Sock

7 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Inflaion, money growh, and ineres, % 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% Recessions Inflaion rae Money growh Ineres rae

8 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Velociy of money sock (PY / M), Recessions Velociy

9 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Worker urnover raes, % 35% 30% 25% 20% 15% 10% 5% 0% Recessions Separaion rae Accession rae

10 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Ouline of a srucural model - Wholesalers Producion happens in a worker-firm mach: y = a z z i i. Worker ges share η of surplus from Nash bargaining. Wholesalers pos vacancies freely a marginal cos γ z. Maches made hrough a maching funcion.

11 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Ouline of a srucural model - Reailers Buy oupu from wholesalers compeiively, mark i up. Face downward-sloping demand curve. Can change heir reail prices wih frequency 1 - ω. This all yields a New Keynesian Phillips Curve.

12 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Ouline of a srucural model - Households Households uiliy over consumpion and labor: = i i i i i i z A C E χ σ β σ Sochasic ransacions echnology: = +1 M V C P

13 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Ouline of a srucural model Shock processes ln( Θ ) = (1 ρ m )ln( Θ) + ρ m ln( Θ 1 ) + ε z [ ] z ln( z ) Γ( 1 ε ln( z ) Γ = ρ 1 ) + ln( z ) = ρ ln( z ) 1 + ε z z Θ ln( V ) = (1 ρ )ln( V ) + ρ ln( V ) 1 + ε V V V ln( η 1 ) = (1 ρη )ln( η) + ρη ln( η ) + ε η ln( A ) = (1 ρ )ln( A ) + ρ ln( A ) 1 + ε A A A

14 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Esimaion sraegy Sae-observer seup wih Kalman filer: x = A 1 x 1 + B ε 1 x = D * 1x + ε * Variances of driving processes esimaed by MLE. Variances of measuremen errors se using likelihood.

15 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Calibraion Model calibraed o mach some long-run raios: Real ineres rae = 4.5% / yr Oupu growh per capia = 1.7% / yr Unemploymen rae = 5.0% Worker finding rae = 70% / qr Job finding rae = 60% / qr Toal separaion rae = 10% / qr Exogenous separaion rae = 6.8% / qr Frequency of price changes = 0.33 / qr Gross markup rae = 110% Consumpion uiliy parameer = 2 Conribuion of u o maching = 0.4 Vacancy posing coss = 1.0% of Y Sd. of log(a i ) = 0.13

16 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Calibraion More calibraions quarerly persisence coefficiens: Persisence on money growh = 0.75 Persisence on emp. produciviy = 0.4 Oher persisence coefficiens = As a resul: Disuiliy of work A = Labor s bargaining power η = 0.461

17 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Calibraion More calibraions observaion errors via likelihood. Sd. Dev: Inflaion = Oupu = Employmen = 0.01 M growh = Ineres rae = Labor share = Vacancies = 0.40 Separaion rae = 0.17 Accession rae = 0.17

18 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Esimaed parameers Shocks o driving processes: Sd. Dev: Money growh = Money demand = Shor-run prod. = Long-run prod. = Bargaining power = Labor disuiliy =

19 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Effecs of shocks on employmen (1929.I = 0) 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% Money Demand Labor Bargaining Labor Supply Daa

20 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Effecs of shocks on oupu (1929.I = 0) 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% -55% Money Demand Long-Run Prod. Labor Bargaining Labor Supply Daa

21 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Discussion Bargaining shocks Bargaining shocks: Mos imporan residual. Accoun for mos of he behavior of employmen. 22% fall in employmen, 1929.I o 1933.I. 17% fall in employmen, 1929.I o 1935.II. Persisen increase in labor s share. Persisen downward shif in Beveridge Curve.

22 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Discussion Labor supply, money, produciviy Labor supply shocks: Large par of slow recovery. Small role in conracion. Produciviy shocks affeced oupu, no employmen. Nominal shocks play some role in conracion, none in slow recovery. See also Bordo, Erceg, and Evans (2000).

23 Wage Bargaining, Job Maching, and he Grea Depression January 2008 Conclusions The bargaining power hypohesis fis he macro daa. Large, persisen increase in labor s share. Reduced vacancies, hiring. Slow recovery. Less reliance on labor supply shocks han oher models. Monearis / New-Keynesian, RBC hypoheses do no fi hese facs.