Renato Faccini, Danmarks Nationalbank

"Job Mobility and Inflation"

Abstract

The low rate of inflation observed in the U.S. over the past decade is hard to reconcile with traditional measures of labor market slack. We develop a theory-based indicator of interfirm competition that can explain the missing inflation. Key to this result is a drop in the rate of on-the-job search, which lowers the intensity of inter.rm wage competition to retain or hire workers. The on-the-job search rate can be measured directly from aggregate labor-market flows and its recent drop is corroborated by micro data.

Contact person: Jeppe Druedahl