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Selection Effects in Producer-Price Setting

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  • Carlsson, Mikael

    (Uppsala University)

Abstract

We use micro data on product prices linked to information on the firms that set them to test for selection effects (state dependence) in micro-level producer pricing. In contrast to using synthetic data from a canonical Menu-Cost model, we find very weak, if any, micro-level selection effects when running price change probability regressions on actual data. Also, fitting a model that nests both time- and state-dependent elements (the CalvoPlus model of Nakamura and Steinsson, 2010), the parameters mimic the standard Calvo (1983) model. Thus, upstream in the supply chain, price setting is best characterized by a very low degree of self-selection.

Suggested Citation

  • Carlsson, Mikael, 2014. "Selection Effects in Producer-Price Setting," Working Paper Series 290, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0290
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    File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2014/rap_wp290_141117.pdf
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    References listed on IDEAS

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    1. Harju, Jarkko & Kosonen, Tuomas & Skans, Oskar Nordström, 2018. "Firm types, price-setting strategies, and consumption-tax incidence," Journal of Public Economics, Elsevier, vol. 165(C), pages 48-72.

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    More about this item

    Keywords

    Price-setting; Business Cycles; Micro Data;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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