Labor Market Dynamics in the U.S. Food Sector

Abstract

Abstract A simultaneous equation model is estimated to explain labor market phenomena (including wages, employment, and labor productivity) and food prices at manufacturing and retail levels of the U.S. food industry. Dynamic simulation results show that endogenizing input costs in a fully specified markup‐pricing model leads to a complex long‐run pattern of food price determination. Wage determination is found to play a central role linking general price levels to food sector prices and labor market behavior. Energy price changes are shown to significantly affect food prices. Food sector labor productivity is found to decline in response to exogenous commodity price shocks.