The Missing Inflation Puzzle: The Role of the Wage-Price Pass-Through /
Price inflation in the U.S. has been sluggish and slow to pick up in the last two decades. We show that this missing inflation can be traced to a growing disconnect between unemployment and core goods inflation. We exploit rich industry-level data to show that weakening pass-through from wages to pr...
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- Englisch
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Cambridge, Mass.
National Bureau of Economic Research
2020.
- Zusammenfassung:
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Price inflation in the U.S. has been sluggish and slow to pick up in the last two decades. We show that this missing inflation can be traced to a growing disconnect between unemployment and core goods inflation. We exploit rich industry-level data to show that weakening pass-through from wages to prices in the goods-producing sector is an important source of the slow inflation pick-up in the last two decades. We set up a theoretical framework where markups and pass-through are a function of firms' market shares and show that increased import competition and rising market concentration reduce pass-through from wages to prices. We then use industry-level data and find strong support for these two channels consistent with the implications of our model.
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- 1 online resource: illustrations (black and white);
- Anmerkungen:
- August 2020.
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