[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fce/doctra/1809.html
   My bibliography  Save this paper

The labor supply of baby boomers and low flation

Author

Listed:
  • Benoît Mojon

    (Banque de France & Ecole Polytechnique)

  • Xavier Ragot

    (OFCE & Sciences Po Paris CNRS)

Abstract
Why is wage inflation so weak in spite of the recent sharp reduction in unemployment? We show that this may be due to an ongoing major positive labor supply shock. Indeed, the participation rate of workers aged between 55 and 64 has increased steadily over the last decade, from a third to above a half on average across OECD countries. This is most likely the consequence of aging and the reform of pensions. We show that the participation rate of workers aged 55 to 64 contributes to explain why wage inflation has remained weak over the last five years. For instance, it accounts for as much as -1% of wage inflation per annum in Germany since 2013. Our second result is that Phillips curves are alive and well. Wage inflation remains highly responsive to domestic unemployment rates, including after the Great Recession.

Suggested Citation

  • Benoît Mojon & Xavier Ragot, 2018. "The labor supply of baby boomers and low flation," Documents de Travail de l'OFCE 2018-09, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1809
    as

    Download full text from publisher

    File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP201809.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Olivier Blanchard, 2018. "Should We Reject the Natural Rate Hypothesis?," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 97-120, Winter.
    2. Raphael A. Auer & Claudio Borio & Andrew Filardo, 2017. "The Globalisation of Inflation: The Growing Importance of Global Value Chains," CESifo Working Paper Series 6387, CESifo.
    3. Johannes F. Schmieder† & Till von Wachter & Stefan Bender, 2011. "The Effects Of Extended Unemployment Insurance Over The Business Cycle: Evidence From Regression Discontinuity Estimates Over Twenty Years," Boston University - Department of Economics - Working Papers Series WP2011-063, Boston University - Department of Economics.
    4. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    5. Nickel, Christiane & Bobeica, Elena & Lis, Eliza & Sun, Yiqiao, 2017. "Demographics and inflation," Working Paper Series 2006, European Central Bank.
    6. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2012. "The Effects of Extended Unemployment Insurance Over the Business Cycle: Evidence from Regression Discontinuity Estimates Over 20 Years," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(2), pages 701-752.
    7. Blanchard, Oliver & Cerutti, Eugenio & SUmmers, Lawrence, 2015. "Inflation and Activity - Two Explorations and Their Monetary Policy Implications," Working Paper Series 15-070, Harvard University, John F. Kennedy School of Government.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pierre Jaillet & Benoît Mojon, 2018. "Les politiques d’objectifs des banques centrales en perspective," Revue française d'économie, Presses de Sciences-Po, vol. 0(3), pages 21-61.
    2. repec:spo:wpmain:info:hdl:2441/5vh68vsbm9akb9r0rkcdi4tmi is not listed on IDEAS
    3. repec:spo:wpmain:info:hdl:2441/8m9642tnm9kuaqr07m32s02jq is not listed on IDEAS
    4. Christophe Blot & Jérôme Creel & Xavier Ragot, 2019. "The Euro at 20: a critical assessment," Working Papers hal-03403622, HAL.
    5. Christophe Blot & Jérôme Creel & Xavier Ragot, 2019. "The Euro at 20: a critical assessment," Post-Print hal-03403622, HAL.
    6. Christophe Blot & Jérôme Creel & Xavier Ragot, 2019. "The Euro at 20: a critical assessment," Post-Print hal-03403622, HAL.
    7. repec:hal:spmain:info:hdl:2441/8m9642tnm9kuaqr07m32s02jq is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/5vh68vsbm9akb9r0rkcdi4tmi is not listed on IDEAS
    9. Christophe Blot & Jérôme Creel & Paul Hubert, 2018. "Why does the revovery show so little inflation," Post-Print hal-03471719, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/67p3ersi9g8r7rictf5hklkqcq is not listed on IDEAS
    2. Benoit Mojon & Xavier Ragot, 2020. "Can an ageing workforce explain low inflation?," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation dynamics in Asia and the Pacific, volume 111, pages 73-79, Bank for International Settlements.
    3. repec:spo:wpmain:info:hdl:2441/67p3ersi9g8r7rictf5hklkqcq is not listed on IDEAS
    4. Benoit Mojon & Xavier Ragot, 2018. "The labor supply of baby-boomers and low-flation," Working Papers hal-03444399, HAL.
    5. Kristin Forbes, 2019. "Has globalization changed the inflation process?," BIS Working Papers 791, Bank for International Settlements.
    6. Kristin J. Forbes, 2019. "Inflation Dynamics: Dead, Dormant, or Determined Abroad?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(2 (Fall)), pages 257-338.
    7. Kristin J. Forbes, 2019. "How Have Shanghai, Saudi Arabia, and Supply Chains Affected U.S. Inflation Dynamics?," Review, Federal Reserve Bank of St. Louis, vol. 101(1), pages 27-44.
    8. Günes Kamber & Madhusudan Mohanty & James Morley, 2020. "What drives inflation in advanced and emerging market economies?," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation dynamics in Asia and the Pacific, volume 111, pages 21-36, Bank for International Settlements.
    9. Karol Szafranek & Aleksandra Hałka, 2019. "Determinants of Low Inflation in an Emerging, Small Open Economy through the Lens of Aggregated and Disaggregated Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(13), pages 3094-3111, October.
    10. Kose, M. Ayhan & Matsuoka, Hideaki & Panizza, Ugo & Vorisek, Dana, 2019. "Inflation Expectations: Review and Evidence," CEPR Discussion Papers 13601, C.E.P.R. Discussion Papers.
    11. Güneş Kamber & Madhusudan Mohanty & James Morley, 2020. "Have the driving forces of inflation changed in advanced and emerging market economies?," BIS Working Papers 896, Bank for International Settlements.
    12. Feldkircher, Martin & Siklos, Pierre L., 2019. "Global inflation dynamics and inflation expectations," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 217-241.
    13. Claudio Borio, 2017. "Secular stagnation or financial cycle drag?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(2), pages 87-98, April.
    14. Christian Friedrich & Peter Selcuk, 2022. "The Impact of Globalization and Digitalization on the Phillips Curve," Staff Working Papers 22-7, Bank of Canada.
    15. Guilloux-Nefussi, Sophie, 2020. "Globalization, market structure and inflation dynamics," Journal of International Economics, Elsevier, vol. 123(C).
    16. Dennis Bonam & Gabriele Galati & Irma Hindrayanto & Marco Hoeberichts & Anna Samarina & Irina Stanga, 2019. "Inflation in the euro area since the Global Financial Crisis," DNB Occasional Studies 1703, Netherlands Central Bank, Research Department.
    17. Frohm, Erik, 2020. "Price-setting and economic slack: Evidence from firm-level survey data," Journal of Macroeconomics, Elsevier, vol. 65(C).
    18. Dufrénot, Gilles & Rhouzlane, Meryem & Vaccaro-Grange, Etienne, 2022. "Potential growth and natural yield curve in Japan," Journal of International Money and Finance, Elsevier, vol. 124(C).
    19. Jašová, Martina & Moessner, Richhild & Takáts, Előd, 2020. "Domestic and global output gaps as inflation drivers: What does the Phillips curve tell?," Economic Modelling, Elsevier, vol. 87(C), pages 238-253.
    20. Ascari, Guido & Fosso, Luca, 2024. "The international dimension of trend inflation," Journal of International Economics, Elsevier, vol. 148(C).
    21. Behera, Harendra & Wahi, Garima & Kapur, Muneesh, 2018. "Phillips curve relationship in an emerging economy: Evidence from India," Economic Analysis and Policy, Elsevier, vol. 59(C), pages 116-126.
    22. Ha,Jongrim & Ivanova,Anna & Ohnsorge,Franziska Lieselotte & Unsal Portillo Ocando,Derya Filiz, 2019. "Inflation : Concepts, Evolution, and Correlates," Policy Research Working Paper Series 8738, The World Bank.

    More about this item

    Keywords

    Monetary policy; wages; compensation; Labor costs;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fce:doctra:1809. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Francesco Saraceno (email available below). General contact details of provider: https://edirc.repec.org/data/ofcspfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.