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How often have wage-price spirals occurred, and what has happened in their aftermath? We investigate this by creating a database of past wage-price spirals among a wide set of advanced economies going back to the 1960s. We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages. Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up. We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.

Macroeconomics --- Economics: General --- Labor --- Inflation --- Price Level --- Deflation --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Wages, Compensation, and Labor Costs: General --- Demand and Supply of Labor: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Labour --- income economics --- Real wages --- Prices --- Labor markets --- Wage adjustments --- Currency crises --- Informal sector --- Economics --- Labor market --- United States

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Using the near universe of online vacancy postings in the U.S., we study the interaction between labor market power and monetary policy. We show empirically that labor market power amplifies the labor demand effects of monetary policy, while not disproportionately affecting wage growth. A search and matching model in which firms can attract workers by either offering higher wages or posting more vacancies can rationalize these findings. We also find that vacancy postings that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. Our results help explain the “wageless” recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, especially for the low-skilled, who saw stagnant wages but a robust decline in unemployment.

Macroeconomics --- Economics: General --- Labor --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy --- Labor Demand --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Demand and Supply of Labor: General --- Wages, Compensation, and Labor Costs: General --- Unemployment: Models, Duration, Incidence, and Job Search --- Economic & financial crises & disasters --- Economics of specific sectors --- Labour --- income economics --- Labor markets --- Labor demand --- Labor share --- Unemployment rate --- Currency crises --- Informal sector --- Economics --- Labor market --- Economic theory --- United States

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In contrast to expectations, remittances to Central America and the Caribbean (CAC) surprised positively during 2020 and 2021. This study revisits the key macro indicators driving remittances, looks at the heterogeneous impacts of the global financial crisis (GFC) and COVID shocks, then uses micro data from the U.S. Current Population Census to examine individual features of immigrant households and how this might affect the “propensity to remit”. The paper finds that remittance flows are responsive to both sending and receiving country economic conditions and that labor market conditions are particularly important determinants of remittance flows, explaining the unexpected jump in remittance flows in 2020-2021 and providing stronger predictive power when combined with income variables. Analysis of the micro data reinforces these findings, reflecting the existence of a family resource sharing model at play.

Macroeconomics --- Economics: General --- Exports and Imports --- Emigration and Immigration --- Labor --- International Migration --- Remittances --- Economywide Country Studies: Latin America --- Caribbean --- Aggregate Factor Income Distribution --- Education: General --- Demand and Supply of Labor: General --- Economic & financial crises & disasters --- Economics of specific sectors --- International economics --- Migration, immigration & emigration --- Education --- Labour --- income economics --- Balance of payments --- Migration --- Population and demographics --- Income --- National accounts --- Labor markets --- Currency crises --- Informal sector --- Economics --- International finance --- Emigration and immigration --- Labor market --- Haiti

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The benchmark optimal income taxation model of Mirrlees (1971) finds that the optimal marginal income tax rate (MIT) is always non-negative. A key model assumption is the coincidence between social and individual work preferences. This paper extends the model to allow for differences in social and individual work preferences. The theoretical and simulation analyses show that under this model, when the government places a higher social weight on work than individuals, the optimal MIT schedule is shifted downwards, introducing the possibility for optimal wage subsidies at the bottom of the income distribution. This implies lower revenues, demogrants, and overall progressivity.

Macroeconomics --- Economics: General --- Taxation --- Labor --- Distribution: General --- Taxation, Subsidies, and Revenue: General --- Aggregate Factor Income Distribution --- Demand and Supply of Labor: General --- Labor Economics Policies --- Efficiency --- Optimal Taxation --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- Labour --- income economics --- Marginal effective tax rate --- Tax policy --- Income tax systems --- Taxes --- Income --- National accounts --- Labor supply --- Employment subsidies --- Currency crises --- Informal sector --- Economics --- Tax administration and procedure --- Income tax --- Labor market --- Manpower policy

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Following a deep recession in 2020 and further contraction in 2021Q1, the euro area economy recovered rapidly in the second and third quarters thanks to high vaccination levels, increasing household and business adaptability to the virus, and continued forceful policy support. Looking ahead, while supply chain disruptions, elevated energy prices, and resurgences of Covid-19 cases—including those related to the Omicron variant—are likely to pose near-term headwinds to growth, the recovery is set to continue in 2022 as the impact of the pandemic on economic activity continues to weaken over time and supply-side constraints ease. Medium-term output losses relative to pre-crisis trends will vary significantly across countries and sectors as will the extent of labor market scarring. Price pressures are building up as production bottlenecks are set to persist for a while. However, inflation—despite increasing significantly in recent months due to transitory factors—is projected to moderate during 2022 and remain below the ECB’s inflation target over the medium term. Uncertainty surrounding the outlook remains high and largely related to pandemic dynamics and legacies, including induced behavioral and preference changes.

Money and Monetary Policy --- International Economics --- Inflation --- Diseases: Contagious --- Macroeconomics --- Labor --- Exports and Imports --- Monetary Policy --- International Agreements and Observance --- International Organizations --- Price Level --- Deflation --- Health Behavior --- Fiscal Policy --- Demand and Supply of Labor: General --- Climate --- Natural Disasters and Their Management --- Global Warming --- Monetary economics --- International institutions --- Infectious & contagious diseases --- Labour --- income economics --- International economics --- Climate change --- Monetary policy --- International organization --- Prices --- COVID-19 --- Health --- Labor markets --- Fiscal stance --- Fiscal policy --- Greenhouse gas emissions --- Environment --- International agencies --- Communicable diseases --- Labor market --- Greenhouse gases