Labour market power can explain ‘wageless recovery’ – IMF paper
Monetary policy can cut unemployment without raising wages where bargaining power is weak
Research published by the International Monetary Fund highlights the role of labour market power in explaining muted wage growth in many advanced economies.
The working paper proposes a mechanism whereby firms with a greater market share have more labour market bargaining power. This means although accommodative monetary policy encourages them to hire more, they will not necessary offer a substantially higher wage.
The authors test this theory using a simple search and matching model, in which
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