 Intensive and Extensive Margins of Labor Supply in HANK: Aggregate and Disaggregate ImplicationsDepartmental Working Papers from Department of Economics, Louisiana State University Abstract: This paper focuses on a labor-supply-side story for the monetary transmission mechanism, which has received relatively little attention in the New Keynesian literature. To this end, I develop a heterogeneous-agent New Keynesian (HANK) economy where a nonlinear mapping from hours worked into labor services generates operative adjustment along intensive and extensive margins of labor supply. The model economy quantitatively accounts for the U.S. data, including hours distributions and their transitions, and excels at producing empirically realistic responses of adjustment along both margins to a monetary policy shock. I fnd that, since the nonlinear mapping breaks the tight link between a curvature parameter and labor supply elasticity, the standard interpretation regarding a New Keynesian Phillips curve may be potentially very misleading from a quantitative perspective. Another important fnding is that monetary policy has signifcantly di erent e ects on earnings inequality, depending on the extent to which margin is dominant, even if it generates similar aggregate responses. Date: 2020-08 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:lsu:lsuwpp:2020-05 Access Statistics for this paper More papers in Departmental Working Papers from Department of Economics, Louisiana State University Contact information at EDIRC. |
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