IDEAS home Printed from https://ideas.repec.org/p/hhs/uunewp/2014_006.html
   My bibliography  Save this paper

Selection Effects in Producer-Price Setting

Author

Listed:
  • Carlsson, Mikael

    () (Department of Economics)

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 fi…nd very weak, if any, micro-level selection effects when running price change probability regressions on actual data. Moreover, when fi…tting a model that nests both time- and state-dependent elements (the CalvoPlus model of Nakamura and Steinsson,2010) to the data, the resulting parameters mimic the standard Calvo (1983) model. Thus, upstream in the supply chain, price-setting is best characterized as time- dependent.

Suggested Citation

  • Carlsson, Mikael, 2014. "Selection Effects in Producer-Price Setting," Working Paper Series 2014:6, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2014_006
    as

    Download full text from publisher

    File URL: http://www.diva-portal.org/smash/get/diva2:740718/FULLTEXT02.pdf
    File Function: Updated version Oct 2014
    Download Restriction: no

    File URL: http://uu.diva-portal.org/smash/get/diva2:740718/FULLTEXT01.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. M. Druant & S. Fabiani & Gabor Kezdi & Ana Lamo & R. Sabbatini & Fernando Martins, 2009. "How are Firms’ Wages and Prices Linked: Survey Evidence in Europe," Working Papers w200918, Banco de Portugal, Economics and Research Department.
    2. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing and the General Equilibrium Dynamics of Money and Output," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 655-690.
    3. Mikael Carlsson & Oskar Nordstrom Skans, 2012. "Evaluating Microfoundations for Aggregate Price Rigidities: Evidence from Matched Firm-Level Data on Product Prices and Unit Labor Cost," American Economic Review, American Economic Association, vol. 102(4), pages 1571-1595, June.
    4. Robert A. Buckle & John A. Carlson, 2000. "Inflation and Asymmetric Price Adjustment," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 157-160, February.
    5. Virgiliu Midrigan, 2011. "Menu Costs, Multiproduct Firms, and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(4), pages 1139-1180, July.
    6. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    7. Mikhail Golosov & Robert E. Lucas Jr., 2007. "Menu Costs and Phillips Curves," Journal of Political Economy, University of Chicago Press, vol. 115, pages 171-199.
    8. Andrew S. Caplin & Daniel F. Spulber, 1987. "Menu Costs and the Neutrality of Money," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 703-725.
    9. Carlsson, Mikael & Messina, Julián & Nordström Skans, Oskar, 2014. "Firm-level shocks and labor adjustments," Working Paper Series 2014:28, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    10. Adam Reiff & Peter Karadi, 2014. "Menu Costs, Aggregate Fluctuations and Large Shocks," 2014 Meeting Papers 914, Society for Economic Dynamics.
    11. Martin Eichenbaum & Nir Jaimovich & Sergio Rebelo & Josephine Smith, 2014. "How Frequent Are Small Price Changes?," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 137-155, April.
    12. Dotsey, Michael & King, Robert G., 2005. "Implications of state-dependent pricing for dynamic macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 213-242, January.
    13. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    14. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    15. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-338, April.
    16. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    17. Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 17-37, February.
    18. Levy, Daniel & Dutta, Shantanu & Bergen, Mark, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 197-220, February.
    19. Claire Loupias & Patrick Sevestre, 2013. "Costs, Demand, and Producer Price Changes," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 315-327, March.
    20. S. Fabiani & M. Druant & I. Hernando & C. Kwapil & B. Landau & C. Loupias & F. Martins & T. Mathä & R. Sabbatini & H. Stahl & A. Stokman, 2005. "The pricing behaviour of firms in the euro area : new survey evidence," Working Paper Research 76, National Bank of Belgium.
    21. Saul Lach & Daniel Tsiddon, 2007. "Small price changes and menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 649-656.
    22. Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 17-26.
    23. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2008. "Evaluating an estimated new Keynesian small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2690-2721, August.
    24. Martin Eichenbaum & Nir Jaimovich & Sergio Rebelo, 2011. "Reference Prices, Costs, and Nominal Rigidities," American Economic Review, American Economic Association, vol. 101(1), pages 234-262, February.
    25. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    26. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1415-1464.
    27. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, 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


    Cited by:

    1. Jarkko Harju & Tuomas Kosonen & Oskar Nordström Skans, 2015. "Firm Types, Price-Setting Strategies, and Consumption-Tax Incidence," CESifo Working Paper Series 5654, CESifo Group Munich.

    More about this item

    Keywords

    Price-setting; Business Cycles; Micro Data;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:uunewp:2014_006. 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: (Katarina Grönvall). General contact details of provider: http://edirc.repec.org/data/nekuuse.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.