Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Mixed Industrial Structure Magnifies the Importance of Menu Costs

Contents:

Author Info

  • Huw David Dixon

    (York University)

  • Claus Thustrup Hansen

    (University of Copenhagen Institute of Economics)

Abstract

New Keynesian literature assumes symmetric industrial structure when analysing explanations of money non-neutrality. This paper analyses the impact of modifying this assumption by allowing for a mixed industrial structure; some industries are characterized by monopolistic competition, others by perfect competition. The mixed industrial structure implies misallocation of labour between the different industries which may contribute to explanations of non-neutrality of money. Following a 5% money increase, the menu costs needed for non-neutrality may be 40 times smaller and ratio of welfare gain over private loss more than 100 times larger than in the corresponding model with a symmetric structure.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dx.doi.org/10.1016/S0014-2921(98)00029-4
Our checks indicate that this address may not be valid because: 503 Service Unavailable (http://dx.doi.org/10.1016/S0014-2921(98)00029-4 [303 See Other]--> http://linkinghub.elsevier.com/retrieve/pii/S0014292198000294 [301 Moved Permanently]--> http://linkinghub.elsevier.com/retrieve/articleSelectSinglePerm?Redirect=http://www.sciencedirect.com/science/article/pii/S0014292198000294?via%3Dihub [301 Moved Permanently]--> http://www.sciencedirect.com/science/article/pii/S0014292198000294?via=ihub). If this is indeed the case, please notify (Thomas Hoffmann)
Download Restriction: no

Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 97-11.

as in new window
Length: 24 pages
Date of creation: Sep 1997
Date of revision:
Publication status: Published in: European Economic Review 43(8) 1999, 1475-1499
Handle: RePEc:kud:kuiedp:9711

Contact details of provider:
Postal: Ă˜ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Email:
Web page: http://www.econ.ku.dk
More information through EDIRC

Related research

Keywords: New Keynesian economics; industrial structure;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Caballero, R.J. & Lyons, R.K., 1991. "External Effects in U.S. Procyclical Productivity," Papers, Columbia - Graduate School of Business 91-19, Columbia - Graduate School of Business.
  2. Dixon, Huw David, 1994. "Macroeconomic Price and Quantity Responses with Heterogeneous Product Markets," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 385-402, July.
  3. Laurence Ball & David Romer, 1987. "Sticky Prices as Coordination Failure," NBER Working Papers 2327, National Bureau of Economic Research, Inc.
  4. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
  5. Susanto Basu & John G. Fernald, 1995. "Are Apparent Productive Spillovers a Figment of Specification Error?," NBER Working Papers 5073, National Bureau of Economic Research, Inc.
  6. Ball, Laurence & Romer, David, 1990. "Real Rigidities and the Non-neutrality of Money," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 183-203, April.
  7. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, American Economic Association, vol. 76(4), pages 637-58, September.
  8. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 529-38, May.
  9. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  10. Basu, Susanto, 1995. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 512-31, June.
  11. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  12. Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
  13. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 921-47, October.
  14. Ball, Laurence & Romer, David, 1989. "Are Prices Too Sticky?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(3), pages 507-24, August.
  15. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-71, September.
  16. Rotemberg, Julio J & Summers, Lawrence H, 1990. "Inflexible Prices and Procyclical Productivity," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(4), pages 851-74, November.
  17. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 647-66, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Huw David Dixon & Claus Thustrup Hansen & Henrik J. Kleven, . "Dual Labour Markets and Menu Costs: Explaining the Cyclicality of Productivity and Wage Differentials," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 99-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Claus Thustrup Kreiner, 2002. "Do the New Keynesian Microfoundations Rationalise Stabilisation Policy?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 384-401, April.
  3. Thomas Lubik, 2003. "Industrial Structure and Monetary Policy in a Small Open Economy," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 493, The Johns Hopkins University,Department of Economics.
  4. Philippe Quirion & Meriem Hamdi-Cherif, 2007. "General equilibrium impact of an energy-saving policy in the public sector," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 38(2), pages 245-258, October.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:9711. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.