Performance pay and shifts in macroeconomic correlations

A coincidence in time between the volatility break associated with the "Great Moderation" and large changes in the pattern of conditional and unconditional correlations between output, hours and labor productivity was detected by Galí and Gambetti (2009). We provide a novel explanation for these findings, based on the major changes that occurred in the U.S. design of labor compensation around the mid-1980s. These include a substantial increase in the incidence of performance pay coupled with a higher responsiveness of real wages to the business cycle. We capture this shift in the structure of labor compensation in a Dynamic New Keynesian (DNK) model and show that, by itself, it generates the disappearance of the procyclical response of labor productivity to non-technology shocks and a reduction of the contractionary effects of technology shocks on hours worked. Moreover, it accounts for a large share of the observed drop in output volatility after 1984 and for most of the observed changes in unconditional correlations.procyclical productivity, wage rigidities, performance pay.

Why are the 2000s so different from the 1970s? : a structural interpretation of changes in the macroeconomic effects of oil prices

October 27, 200

Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices

In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, and at least until the end of 2007, even larger increases in the price of oil were associated with much milder movements in output and inflation. Using a structural VAR approach Blanchard and Gali (2007a) argued that this has reflected in large part a change in the causal relation from the price of oil to output and inflation. In order to shed light on the possible factors behind the decrease in the macroeconomic effects of oil price shocks, we develop a new-Keynesian model, with imported oil used both in production and consumption, and we use a minimum distance estimator that minimizes, over the set of structural parameters and for each of the two samples (pre and post 1984), the distance between the empirical SVAR-based impulse response functions and those implied by the model. Our results point to two relevant changes in the structure of the economy, which have modified the transmission mechanism of the oil shock: vanishing wage indexation and an improvement in the credibility of monetary policy. The relative importance of these two structural changes depends however on how we formalize the process of expectations formation by economic agents.

Production of He-4 and (4) in Pb-Pb collisions at root(NN)-N-S=2.76 TeV at the LHC

Results on the production of He-4 and (4) nuclei in Pb-Pb collisions at root(NN)-N-S = 2.76 TeV in the rapidity range vertical bar y vertical bar <1, using the ALICE detector, are presented in this paper. The rapidity densities corresponding to 0-10% central events are found to be dN/dy4(He) = (0.8 +/- 0.4 (stat) +/- 0.3 (syst)) x 10(-6) and dN/dy4 = (1.1 +/- 0.4 (stat) +/- 0.2 (syst)) x 10(-6), respectively. This is in agreement with the statistical thermal model expectation assuming the same chemical freeze-out temperature (T-chem = 156 MeV) as for light hadrons. The measured ratio of (4)/He-4 is 1.4 +/- 0.8 (stat) +/- 0.5 (syst). (C) 2018 Published by Elsevier B.V.Peer reviewe

Labor force participation, wage rigidities, and inflation

The fall in the US labor force participation during the Great Recession stands in sharp contrast with its parallel increase in the euro area. In addition to structural forces, cyclical factors are also shown to account for these patterns, with the participation rate being procyclical in the US since the inception of the crisis and countercyclical in the euro area. We rationalize these diverging developments by using a general equilibrium business cycle model, which nests the endogenous participation decisions into a search and matching framework. We show that the “added worker” effect might outweigh the “discouragement effect” if real wage rigidities are allowed for and/or habit in consumers’ preferences is sufficiently strong. We then draw the implications of variable labor force participation for inflation and establish the following result: if endogenous movements in labor market participation are envisaged, then the degree of real wage rigidities becomes almost irrelevant for price dynamics. Indeed, during recessions, the upward pressures on inflation stemming from the lack of downward adjustment of real wages are offset by an opposite influence from the additional looseness in the labor market, due to the higher participation associated with wage rigidities

Performance pay and changes in US labor market dynamics

A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed changes in the U.S. labor market dynamics. It generates the disappearance of the procyclical response of labor productivity to non-technology shocks and the reduction of the contractionary effects of technology shocks on hours. Moreover, it is conducive to a drop in the volatility of output, a parallel increase in the volatility of wages and to changes in unconditional correlations consistent with what documented in the U.S. between the pre- and post-1984 periods. (C) 2013 Elsevier B.V. All rights reserved

Labour force participation, wage rigidities, and inflation

The fall in the US labor force participation during the Great Recession stands in sharp contrast with its parallel increase in the euro area. In addition to structural forces, cyclical factors are also shown to account for these patterns, with the partic- ipation rate being procyclical in the US since the inception of the crisis and coun- tercyclical in the euro area. We rationalize these diverging developments by using a general equilibrium business cycle model, which nests the endogenous participation decisions into a search and matching framework. We show that the "added worker" effect might outweigh the "discouragement effect" if real wage rigidities are allowed for and/or habit in consumersípreferences is su¢ ciently strong. We then draw the implications of variable labor force participation for ináation and establish the fol- lowing result: if endogenous movements in labor market participation are envisaged, then the degree of real wage rigidities becomes almost irrelevant for price dynamics. Indeed, during recessions, the upward pressures on inflation stemming from the lack of downward adjustment of real wages are offset by an opposite influence from the additional looseness in the labor market, due to the higher participation associated with wage rigidities