Discussion paper

DP17829 Job-to-Job Mobility and Inflation

The low rate of inflation observed in the U.S. over the past decade is hard to reconcile with traditional measures of labor market slack. We develop a theory-based indicator of interfirm wage competition that can explain the missing inflation. Key to this result is a drop in the rate of on-the-job search, which lowers the intensity of interfirm wage competition to retain or hire workers. We estimate the on-the-job search rate from aggregate labor-market flows and show that its recent drop is corroborated by survey data. During "the great resignation", the indicator of interfirm wage competition rose, raising inflation by around 1 percentage point during most of 2021.


Faccini, R and L Melosi (eds) (2023), “DP17829 Job-to-Job Mobility and Inflation”, CEPR Press Discussion Paper No. 17829. https://cepr.org/publications/dp17829