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Pricing behavior and the comovement of productivity and labor: evidence from firm-level data

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Author Info
Domenico J. Marchetti () (Banca d'Italia)
Francesco Nucci () (Universita' di Roma La Sapienza)
Abstract

Recent contributions have suggested that technology shocks have a negative short-run effect on labor input, contrary to the predictions of standard flexible-price models of the business cycle. Some authors have interpreted this finding as evidence in favor of stickyprice models, while others have either augmented flexible-price models in a number of ways or disputed the empirical finding itself. In this paper we estimate a number of alternative measures of TFP growth for a representative sample of Italian manufacturing firms and find a negative impact of productivity shocks on labor input. Furthermore, by relying on the firmlevel reported frequency of price reviews, we find that the contractionary effect is strong for firms with stickier prices, but it is weaker or not significant for firms with more flexible prices, consistently with the prediction of sticky-price models.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 524.

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Date of creation: Dec 2004
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Handle: RePEc:bdi:wptemi:td_524_04

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Related research
Keywords: Productivity shocks; Labor input; price stickiness;

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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  1. Francesco Daveri & Cecilia Jona-Lasinio, 2005. "Italy's Decline: Getting the Facts Right," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 365-410, December. [Downloadable!]
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