A basic tenet of economic science is that productivity growth is the source of growth in real income per capita. But our results raise doubts by creating a direct link between macro productivity growth and the micro evolution of the income distribution. We show that over the entire period...

This Paper develops a framework for the analysis of the effects of institutions on economic performance in a monetary union in the presence of stabilization policy, unionized labour markets and monopolistically competitive price setting firms. Nominal wages are fixed contractually. In spite of...

Monetary policy affects both real variables, such as employment, unemployment and output and nominal variables such as nominal interest and inflation rates. For close to a decade the principal focus of monetary policy has been on inflation. During a recession, or when one appears imminent, the...

Existing literature on the strategic interaction between the central bank (CB) and unions assumes that firms face perfect competition on product markets and that inflation is chosen directly by the monetary authority. Although these simplifications have the virtue of making complex strategic...

We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wage policy, rent-sharing (between workers and firms) and a measure of wage entitlement are...

We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of...

This paper presents a theory of the monetary transmission mechanism in a monetary version of Farmer’s (2009) model in which there are multiple equilibrium unemployment rates. The model has two equations in common with the new-Keynesian model; the optimizing IS curve and the policy rule. It...

In this paper we estimate a New-Keynesian DSGE model with heterogeneity in price and wage setting behavior. In a recent study, Coibion and Gorodnichenko (2011) develop a DSGE model, in which firms follow four different types of price setting schemes: sticky prices, sticky information, rule of...

We use the first three waves of the Household Income and Labour Dynamics in Australia (HILDA) Survey to examine the retirement plans of middle-aged workers (aged 45-55). Our results indicate that approximately two-thirds of men and more then half of women appear to be making standard retirement...

Do students benefit from compulsory schooling? Researchers using changes in compulsory schooling laws as instruments have typically estimated very high returns to additional schooling that are greater than the corresponding OLS estimates and concluded that the group of individuals who are...