Data and Replication Code for: Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity

Principal Investigator(s): View help for Principal Investigator(s) Juan Dolado, Universidad Carlos III de Madrid; Gergo Motyovszki, European University Institute; Evi Pappa, Universidad Carlos III de Madrid

Version: View help for Version V1

Name	File Type	Size	Last Modified
empirical SVAR analysis			03/30/2020 08:37:AM
theoretical DSGE model			10/07/2020 02:58:PM
readme_combined.pdf	application/pdf	292.6 KB	03/30/2020 04:01:AM

Project Citation:

Dolado, Juan, Motyovszki, Gergo, and Pappa, Evi. Data and Replication Code for: Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity. Nashville, TN: American Economic Association [publisher], 2021. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-03-18. https://doi.org/10.3886/E117386V1

Project Description

Summary: We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions and capital-skill complementarity (CSC) in production. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel.

Funding Sources: European University Institute research grant (IE-54); Spanish Ministerio de Economıa y Competitividad (ECO2016-78652)

Scope of Project

Subject Terms: Monetary policy; Search and matching; Inequality; Capital-skill complementarity

JEL Classification:
      E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
      E25 Aggregate Factor Income Distribution
      E52 Monetary Policy
      J64 Unemployment: Models, Duration, Incidence, and Job Search

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V1 [2021-03-18]

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