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Monetary Policy and Labor Income Inequality: the Role of Extensive and Intensive Margins

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  • Paul Hubert

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Frédérique Savignac

    (Banque de France - Banque de France - Banque de France)

Abstract

Using French matched administrative-survey data, we quantify the distributional effects of monetary policy on labor income and decompose the extensive and intensive margins of these effects. We find that the effects of ECB monetary policy shocks on labor income are U-shaped along the labor income distribution. These effects are driven by the extensive margin (transitions out or to unemployment) at the bottom of the distribution and by the intensive margin (labor income changes for individuals continuously employed) at the top. We document that sectoral heterogeneity, especially related to the labor force composition, is crucial in explaining these heterogeneous effects.

Suggested Citation

  • Paul Hubert & Frédérique Savignac, 2023. "Monetary Policy and Labor Income Inequality: the Role of Extensive and Intensive Margins," Working Papers hal-04524715, HAL.
    • Handle: RePEc:hal:wpaper:hal-04524715
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04524715
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    Cited by:

    1. Andreas Fagereng & Magnus A. H. Gulbrandsen & Martin B. Holm & Gisle J. Natvik, 2021. "How does monetary policy affect household indebtedness?," Working Paper 2021/5, Norges Bank.
    2. Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," Working Paper Series 2858, European Central Bank.

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    More about this item

    Keywords

    distributional effects; household heterogeneity; labor market;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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