EconPapers    
Economics at your fingertips  
 

Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries

Yongsung Chang (), Andreas Hornstein and Marios Karabarbounis

Economic Quarterly, 2020, issue 1Q, 1-17

Abstract: In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. This cyclical pattern of composition changes in the consumption basket has the potential to reduce the volatility of measures of the labor-market wedge, the gap between the marginal rate of substitution and the real wage. Based on household expenditure patterns from the Consumer Expenditure Survey, we show that this composition bias has only a limited impact on the measured labor-market wedge, accounting for 6 percent to 16 percent of its cyclical volatility.

Keywords: Labor market; Marginal rate; Wages (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.richmondfed.org/-/media/richmondfedorg ... 020/q1/hornstein.pdf Full text (application/pdf)

Related works:
Working Paper: Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries (2020) Downloads
Working Paper: Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries (2018) Downloads
Working Paper: Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedreq:88439

Ordering information: This journal article can be ordered from

DOI: 10.21144/eq1060101

Access Statistics for this article

More articles in Economic Quarterly from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-04-09
Handle: RePEc:fip:fedreq:88439