Labour market power can explain ‘wageless recovery’ – IMF paper

International Monetary Fund Headquarters 2, Washington, DC
Photo: John Harrington

Research published by the International Monetary Fund highlights the role of labour market power in explaining muted wage growth in many advanced economies.

The working paper proposes a mechanism whereby firms with a greater market share have more labour market bargaining power. This means although accommodative monetary policy encourages them to hire more, they will not necessary offer a substantially higher wage.

The authors test this theory using a simple search and matching model, in which

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