Inflation and Labor Markets: A Bottom-Up View

By Sophia Chen, Deniz O Igan, Do Lee, Prachi Mishra

October 11, 2024

Download PDF More Formats on IMF eLibrary Order a Print Copy

More formats on IMF eLibrary Order a Print Copy

Preview Citation

Format: Chicago

Sophia Chen, Deniz O Igan, Do Lee, and Prachi Mishra. "Inflation and Labor Markets: A Bottom-Up View", IMF Working Papers 2024, 220 (2024), accessed November 12, 2024, https://0-doi-org.library.svsu.edu/10.5089/9798400291807.001

Export Citation

ProCite
RefWorks
Reference Manager

BibTex
Zotero

EndNote

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

U.S. inflation surged in 2021-22 and has since declined, driven largely by a sharp drop in goods inflation, though services inflation remains elevated. This paper zooms into services inflation, using proprietary microdata on wages to examine its relationship with service sector wage growth at the Metropolitan Statistical Area (MSA) level. We estimate the wage-price pass-through with a local projection instrumental variable model that exploits variation in labor market tightness across MSAs. Our findings reveal a positive and significant relationship between wages and price growth, with a lag. This suggests that the effects of tight labor markets are persistent and may influence the pace of progression toward the inflation target.

Subject: Economic sectors, Housing, Inflation, Labor, Labor markets, National accounts, Prices, Services sector, Wages

Keywords: Global, Goods inflation, Housing, IMF working paper No. 2024/220, Inflation, Labor Market Conditions, Labor markets, Services inflation, Services sector, Wage growth, Wage-price pass-through, Wages

Publication Details

Pages:

37
Volume:

2024
DOI:

https://0-doi-org.library.svsu.edu/10.5089/9798400291807.001
Issue:

220
Series:

Working Paper No. 2024/220
Stock No:

WPIEA2024220
ISBN:

9798400291807
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers