Job Market Paper

Bargaining shocks and the macroeconomy: A narrative approach

What are the effects of increases in the bargaining power of workers on output and income distribution? This paper uses a narrative approach to answer this question. I find that a typical increase in the bargaining power of workers lowers output between 0.4% and 0.8% in the long-run, with nil or negative effects on inequality. Bargaining shocks account for a third of output fluctuations at all horizons, but explain a negligible fraction of the variance of unemployment. Absent bargaining shocks, the recent decline in the labor share would have been 20% more pronounced, with demand shocks accounting for most of it's recent decline.