Job Polarization and the Flattening of the Price Phillips Curve

This paper shows that the change in occupational composition of labor market favour non-routine jobs -i.e. job polarization- flattens price Phillips Curve (PC). Using data from European Monetary Union and exploiting fact polarization accelerates during recessions, we obtain two results. First, countries experiencing a bigger shift structure downturn exhibit flatter PC afterward. Second, shifts experienced Great Recession Sovereign Debt Crisis explain up to forth flattening curve 2002-2018 period. We reconcile this evidence through New Keynesian model with unemployment search matching frictions. Heterogeneity fluidity across segments differences separation hiring rate jobs- is source flattening.