Bargaining Shocks and Aggregate Fluctuations

Thorsten Drautzburg, Jesus Fernandez-Villaverde and Pablo Guerron

No 23647, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that social and political risk causes significant aggregate fluctuations by changing workers' bargaining power. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks trigger output and unemployment movements. To quantify the aggregate importance of these distribution shocks, we extend an otherwise standard neoclassical growth economy. We model distribution shocks as exogenous changes in workers' bargaining power in a labor market with search and matching. We calibrate our economy to the U.S. corporate non-financial business sector, and we back out the evolution of workers' bargaining power. We show how the estimated shocks agree with the historical narrative evidence. We document that bargaining shocks account for 28% of aggregate fluctuations and have a welfare cost of 2.4% in consumption units.

JEL-codes: E32 E37 E44 J20 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-dge, nep-mac and nep-rmg
Note: EFG
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Citations: View citations in EconPapers (6)

Published as Drautzburg, Thorsten & Fernández-Villaverde, Jesús & Guerrón-Quintana, Pablo, 2021. "Bargaining shocks and aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).

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Related works:
Journal Article: Bargaining shocks and aggregate fluctuations (2021)
Working Paper: Bargaining Shocks and Aggregate Fluctuations (2021)
Working Paper: Bargaining Shocks and Aggregate Fluctuations (2021)
Working Paper: Bargaining Shocks and Aggregate Fluctuations (2020)
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