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Bargaining Shocks and Aggregate Fluctuations
We argue that social and political risk causes signiﬁcant aggregate ﬂuctuations by changing bargaining power. To that end, we document signiﬁcant changes in the capital share after large political events, such as political realignments, modiﬁcations in collective bargaining rules, or the end of dictatorships, in a sample of developed and emerging economies. These policy changes are associated with signiﬁcant ﬂuctuations in output. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks cause movements in output and unemployment. To quantify the ...