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Striking a bargain : narrative identification of wage bargaining shocks
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1725-2806
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ECB Working Paper; 2021/2602
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SOKOL, Andrej, PORQUEDUU, Mario, BUDRYS, Žymantas, Striking a bargain : narrative identification of wage bargaining shocks, ECB Working Paper, 2021/2602 - https://hdl.handle.net/1814/92788
Abstract
We quantify the effects of wage bargaining shocks on macroeconomic aggregates using a structural vector auto-regression model for Germany. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This narrative information disciplines the impulse responses to a wage bargaining shock of unemployment and output, and sharpens inference on the behaviour of other variables. The implied transmission mechanism is in line with the theoretical predictions of a large class of search and matching models. We also find that wage bargaining shocks explain a sizeable share of aggregate fluctuations in unemployment and inflation, that their pass-through to prices is very close to being full, and that they imply plausible dynamics for the vacancy rate, firms' profits, and the labour share.