Time: 10:00 am - 11:30 am, Nov. 14th, 2025

Speaker: Chen Lian (University of California, Berkeley)

Venue: Zoom

Meeting ID: 821 9499 0142

Passcode: 655507

Abstract:

How costly is inflation to workers? Answers to this question have focused on the path of real wages during inflationary periods. We argue that workers must take costly actions (“conflict”) to have nominal wages catch up with inflation, meaning there are welfare costs even if real wages do not fall as inflation rises. We study a menu-cost style model, where workers choose whether to engage in conflict with employers to secure a wage increase. We show that, following a rise in inflation, wage catch-up resulting from more frequent conflict does not raise welfare. Instead, the impact of inflation on worker welfare is determined by what we call “wage erosion”—how inflation would lower real wages if workers’ conflict decisions did not respond to inflation. As a result, using observed wage growth to measure worker welfare understates the costs of inflation. We conduct a survey showing that workers are willing to sacrifice around 1.75% of their wages to avoid conflict. Calibrating the model to survey data, we find that incorporating conflict significantly raises the costs of inflation for workers.

Speaker：

Chen Lian is an Assistant Professor of Economics at the University of California, Berkeley, and a Faculty Research Fellow at the National Bureau of Economic Research (NBER). He received his Ph.D. in Economics from the Massachusetts Institute of Technology and dual bachelor's degrees in Economics and Mathematics from MIT. His research interests span macroeconomics, monetary economics, behavioral economics, and finance, with a focus on belief formation, financial frictions, and the macroeconomic implications of bounded rationality. Prof. Lian's work has been published in leading journals, including Econometrica, Journal of Political Economy, Review of Economic Studies, Quarterly Journal of Economics, American Economic Review: Insights, and Review of Financial Studies. He is a recipient of the Sloan Research Fellowship and serves as an Associate Editor at the Journal of the European Economic Association.