Francesco D’Amuri, Marta De Philippis, Elisa Guglielminetti, Salvatore Lo Bello
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引用次数: 0
Abstract
Despite the magnitude and cyclicality of transitions into and out of the labor force, the literature generally considers unemployment as a sufficient statistic of labor market slack. We question this view by jointly estimating natural unemployment and participation rates through a Phillips curve informed by structural labor market flows. Focusing on Italy, a country where flows into and out of the labor force are particularly large, we find that the participation margin accounts for a significant share of total slack and explains one third of the missing inflation that followed the 2011 Sovereign Debt Crisis. Exploiting a reform that sharply and unexpectedly increased the statutory retirement age and expanded labor supply without directly affecting unemployment, we confirm that neglecting the participation gap biases inflation forecasts.
期刊介绍:
Economic Policy provides timely and authoritative analyses of the choices confronting policymakers. The subject matter ranges from the study of how individual markets can and should work to the broadest interactions in the world economy. Economic Policy features: Analysis of key issues as they emerge Views of top international economists Frontier thinking without technical jargon Wide-reaching coverage of worldwide policy debate