Nuremberg Research Seminar in Economics on 8 May 2024, LG 0.423
You are invited to join the weekly Nuremberg Research Seminar in Economics on 8 May 2024, from 13.15 to 14.45 pm. The seminar will be held in room LG 0.423. Roland Winkler (Friedrich Schiller University Jena) will be talking about „Labor Market Power and the Effects of Fiscal Policy”.
More information can be found here:
We propose a new fiscal transmission channel based on countercyclical monopsony power in the labor market. We develop a Two-Agent New Keynesian model incorporating a time-varying degree of monopsony power, with workers valuing various job aspects and firms having wage-setting power, inversely related to the elasticity of labor supply to individual firms. As government spending increases, labor supply to individual firms becomes more elastic, creating more competition, larger fiscal multipliers, and stronger distributional consequences. We examine this channel’s interactions with other fiscal transmission channels. Finally, we confirm empirically the model’s prediction of reduced employer market power following government spending expansions.