Cover IMF Working Papers
Buy Book in Print
Inflation and Labor Markets: A Bottom-Up View
Author:
Sophia Chen
Search for other papers by Sophia Chen in
Current site
Google Scholar Close
,
Deniz O Igan
Search for other papers by Deniz O Igan in
Current site
Google Scholar Close
https://orcid.org/0000-0002-9501-1807
,
Do Lee
Search for other papers by Do Lee in
Current site
Google Scholar Close
, and
Prachi Mishra
Search for other papers by Prachi Mishra in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 220
Language:
English
Publication Date:
11 Oct 2024
DOI:
https://doi.org/10.5089/9798400291807.001
ISBN:
9798400291807
ISSN:
1018-5941
Pages:
37
Keywords:
Inflation; Wages; Labor Market Conditions; goods inflation; wage-price pass-through; services inflation; IMF working paper No. 2024/220; wage growth; Labor markets; Housing; Services sector; Global
Legal-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.
Download PDF (2.6 MB) Download Epub
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.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund