Job Polarization and the Flattening of the Price Phillips Curve
Daniele Siena () and
Working papers from Banque de France
This paper shows that the change in the occupational composition of the labor market in favour of non-routine jobs -i.e. job polarization- flattens the price Phillips Curve (PC). Using data from the European Monetary Union and exploiting the fact that job polarization accelerates during recessions, we obtain two results. First, countries experiencing a bigger shift in the occupational structure during a downturn exhibit a flatter PC afterward. Second, the occupational shifts experienced during the Great Recession and the Sovereign Debt Crisis explain up to a forth of the flattening of the curve in the 2002-2018 period. We reconcile this evidence through a New Keynesian model with unemployment and search and matching frictions. Heterogeneity in the fluidity across segments of the labor market -i.e. differences in the separation and hiring rate across jobs- is the source of PC flattening.
Keywords: Phillips Curve; Job Polarization; Occupational Composition; Monetary Policy; Labor Market Fluidity. (search for similar items in EconPapers)
JEL-codes: E31 E32 J21 (search for similar items in EconPapers)
Pages: 56 pages
New Economics Papers: this item is included in nep-dge, nep-eec, nep-isf, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:819
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