Globalization, Market Structure and the Flattening of the Phillips Curve.

Guilloux-Nefussi, Sophie

doi:10.2139/ssrn.2578928

Cited by 5 publications

(1 citation statement)

References 43 publications

(24 reference statements)

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“…The latter series limits distortions from filers with incomes too small to qualify for the self-employment tax and those filing business income from tax shelters that shield capital income from taxation, and in this way improves upon 1 Cavallo (2018) has found evidence that increased online shopping has made retail markets more contestable. Guilloux-Nefussi (2015) theoretically shows how lower transactions (iceberg) costs can flatten the slope of the Phillips Curve in a new Keynesian DSGE framework with trade. In the more traditional Phillips Curve specification used here, the estimates are from a post-Volcker disinflation sample period, which limits the effects of changes in credibility as an explanation for changes in inflation dynamics in the more recent period.…”

Section: Introductionmentioning

confidence: 98%

Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?

Duca

2018

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During the recovery from the Great Recession, inflation did not reach the central bank's 2 percent objective as quickly as many models had predicted. This coincided with increases in online shopping, which arguably made retail markets more contestable and damped retail inflation. This hypothesis is tested using data on the online share of retail sales, which are incorporated into an econometric model. Results imply that the rise of online retail has flattened the Phillips Curve, reducing the sensitivity of inflation to unemployment rate changes. Improvement in fit from just including the online share is tiny-so far. Other results indicate that market-based price indexes are more sensitive to unemployment than measures such as core PCE, which puts a sizable weight on items with imputed prices that may slowly adjust to market conditions. Further, measures of online sales that internalize substitution between online and traditional mail order sales better help track the impact of online sales on inflation dynamics.A complementary factor is the "gig" economy and the rise of self-employment, which by reducing the bargaining power of labor, could lower the natural rate of unemployment. Model performance and fits are improved using a hybrid approach in which the rise of online sales can flatten the slope of the Phillips Curve by reducing retail pricing power and the prevalence of gig or self-employment can lower the natural rate of unemployment.By omitting important structural changes in both goods and labor markets, conventional Phillips Curve models have failed to track how the rise of online retailing has flattened the Phillips Curve and how the rise of the gig economy (selfemployment) has lowered the natural rate of unemployment. One notable difference between the price-price and wage-price results is that the combined effects of online shopping and self-employment are more notable on wage inflation than on price inflation. This could plausibly reflect that improvements in information technology may have undermined the pricing power of workers in labor markets to a greater degree than they have affected the pricing power of producers in goods markets.

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Section: Introductionmentioning

confidence: 98%

Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?

Duca

2018

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Inflation and optimal monetary policy in a model with firm heterogeneity and Bertrand competition

Andrés

Burriel

2018

European Economic Review

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Globalization, Market Structure and the Flattening of the Phillips Curve

Guilloux-Nefussi¹

2015

SSRN Journal

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La baisse de la sensibilité de l'inflation aux conditions domestiques observée dans les pays développés au cours des 25 dernières années a souventété attribuéeà la mondialisation. Toutefois, cette intuition n'a pasété formalisée jusqu'à présent. Je développe un modèle d'équilibre général qui permet de rendre compte de l'aplatissement de la courbe de Phillips en réponseà une baisse des coûts de transport. Pour ce faire, j'incorpore trois nouveaux ingrédients dans un modèle néokeynésien standard a deux pays : des interactions stratégiques engendrent un markup variable ; l'entrée endogène d'entreprises fait dépendre la structure du marché de la mondialisation ; la productivité hétérogène entre les entreprises permet l'auto-sélection des plus productives. En raison de l'hétérogénéité de la productivité, seules les entreprises les plus efficaces (qui sont aussi les plus grandes) choisissent d'exporter. Les grosses entreprises ont tendanceà moins transmettre les fluctuations des coûts marginaux a l'inflation parce qu'elles absorbent ces chocs dans leur marge afin de protéger leur part de marché. Au niveau agrégé, l'augmentation de la part des grandes entreprises dans l'économie réduit la sensibilité de l'inflation au coût marginal domestique.

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Globalization, Market Structure and the Flattening of the Phillips Curve.

Cited by 5 publications

References 43 publications

Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?

Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?

Inflation and optimal monetary policy in a model with firm heterogeneity and Bertrand competition

Globalization, Market Structure and the Flattening of the Phillips Curve

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