Networks in labor markets and welfare costs of inflation

Marcelo Arbex and Dennis O'Dea

No 1401, Working Papers from University of Windsor, Department of Economics

Abstract: We study the welfare costs of inflation in a monetary general equilibrium model with networks in the labor market. Unemployment results when individuals are unsuccessful in hearing about job opportunities, either directly or through their peers. Inflation affects the consumption-leisure choice differently depending on job network structure; inflation hits harder in more connected networks. In these networks, people consume more and enjoy more leisure, leading to higher welfare. Inflation reduces consumption and hurts households more, when labor markets are more effective.

Keywords: Social networks; Labor market frictions; Inflation; Welfare costs of inflation (search for similar items in EconPapers)
JEL-codes: D85 E31 E40 J64 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2014-06
New Economics Papers: this item is included in nep-mac, nep-mon and nep-ure
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http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1401.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:wis:wpaper:1401

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