Market power arises in the case where a seller is aware that raising output will depress price. In the profit-maximizing equilibrium with market power, price exceeds marginal cost. The Lerner index---the ratio of price less marginal cost to the price---is a widely accepted measure of market...

The financial crisis and ensuing Great Recession left the U.S. economy in an injured state. In 2013, output was 13 percent below its trend path from 1990 through 2007. Part of this shortfall--2.2 percentage points out of the 13--was the result of lingering slackness in the labor market in the...

New data compel a new view of events in the labor market during a recession. Unemployment rises almost entirely because jobs become harder to find. Recessions involve little increase in the flow of workers out of jobs. Another important finding from new data is that a large fraction of workers...

This paper sets forth a simple general structural model of aggregate output, the interest rate, and the price level. The core of the model is the determination of the level of output as a product-market equilibrium, either competitive or oligopolistic, possible indeterminate because of...

An examination of data on labor input and the quantity of output reveals that most U.S. industries have marginal costs far below their prices. The corilusion rests on the empirical finding that cyclical variations in labor input are small compared to variations in output. In booms, firms produce...

Though the U.S. labor market is justly notorious for high turnover and consequent high unemployment, it also provides stable, near-lifetime employment to an important fraction of the labor force. This paper investigates patterns of job duration by age, race, and sex, with the following major...

The markup of price over marginal cost reveals market power. The distinction between marginal and average cost is key. Average cost is easy to measure, but the price/average cost ratio understates the price/marginal cost ratio when fixed costs are present. In particular, in free-entry...

Today, all major central banks pay or collect interest on reserves, and stand ready to use the interest rate as an instrument of monetary policy. We show that by paying an appropriate rate on reserves, the central bank can pin the price level uniquely to a target. The essential idea is to index...

The immediate effect of Friedman's 1968 AEA presidential address on the economics profession was the introduction of an adaptive term in the Phillips curve that shifted the curve, as Friedman proposed, based on expected inflation. Initial formulations suggested that the shift was less than...