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The Heterogeneous Effects of Monetary Policy on Labor Income: Disentangling the Extensive and Intensive Margins

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  • Paul Hubert
  • Frédérique Savignac

Abstract

Using French matched administrative survey data, we quantify the distributional effects of monetary policy on labor income, decomposing the extensive and intensive margins of these effects. We provide evidence of heterogeneous exposure to unemployment and earnings risks. We find that the effects of European Central Bank monetary policy shocks on labor income are driven by the extensive margin (transitions out of/into unemployment) at the bottom of the earnings distribution and by the intensive margin (changes in labor income for individuals continuously employed) at the top. Sectoral heterogeneity, particularly related to the labor force composition, plays an important role in explaining these heterogeneous effects.

Suggested Citation

  • Paul Hubert & Frédérique Savignac, 2024. "The Heterogeneous Effects of Monetary Policy on Labor Income: Disentangling the Extensive and Intensive Margins," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 2(4), pages 687-719.
    • Handle: RePEc:ucp:jpemac:doi:10.1086/732469
    DOI: 10.1086/732469
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