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

  • Domenico J. Marchetti

    ()

    (Banca d'Italia)

  • Francesco Nucci

    ()

    (Universita' di Roma La Sapienza)

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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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2004/2004-0524/tema_524.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area 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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Web page: http://www.bancaditalia.it

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  1. Lopez-Salido, Jose David & Michelacci, Claudio, 2004. "Technology Shocks and Job Flows," CEPR Discussion Papers 4426, C.E.P.R. Discussion Papers.
  2. Jordi Gali & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBS Model Fit Postwar U.S. Data?," NBER Working Papers 10636, National Bureau of Economic Research, Inc.
  3. Galí, Jordi & Rabanal, Pau, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Post-War US Data?," CEPR Discussion Papers 4522, C.E.P.R. Discussion Papers.
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