scholarly journals Evaluating Microfoundations for Aggregate Price Rigidities: Evidence from Matched Firm-Level Data on Product Prices and Unit Labor Cost

2012 ◽  
Vol 102 (4) ◽  
pp. 1571-1595 ◽  
Author(s):  
Mikael Carlsson ◽  
Oskar Nordström Skans
Keyword(s):  
Marginal Cost ◽  
Labor Cost ◽  
Unit Labor Cost ◽  
Firm Level ◽  
Price Adjustments ◽  
Level Data ◽  
Price Rigidities ◽  
Key Driver ◽  
Pass Through ◽  
Matched Data

Using matched data on product-level prices and the producing firm's unit labor cost, we find a moderate pass-through of current idiosyncratic marginal-cost changes. Also, the response does not vary across firms facing very different idiosyncratic shock variances, but identical aggregate conditions. These results do not fit the predictions of Mackowiak and Wiederholt (2009). Neither do firms react strongly to predictable marginal-cost changes, as expected from Mankiw and Reis (2002). We find that firms consider both current and expected future marginal cost when setting prices. This points toward impediments to continuous price adjustments as a key driver of monetary non-neutrality.

scholarly journals Demand, Supply, and Markup Fluctuations

2021 ◽  
Author(s):  
Carlos D Santos ◽  
Luís F Costa ◽  
Paulo B Brito
Keyword(s):  
Structural Model ◽  
Supply And Demand ◽  
Aggregate Demand ◽  
Cost Curve ◽  
Firm Level ◽  
Demand Shocks ◽  
Marginal Costs ◽  
Price Adjustments ◽  
Marginal Cost Curve ◽  
Pass Through

Abstract Markup cyclicality has been central for debating policy effectiveness and understanding business-cycle fluctuations. However, measuring the cyclicality of markups is as important as understanding the microeconomic mechanisms underlying that cyclicality. The latter requires measurement of firm-level markups and separating supply from demand shocks. We construct a novel dataset with detailed (multi-)product-level prices for individual firms. By estimating a structural model of supply and demand, we evaluate how companies adjust prices and marginal costs as a response to shocks. We find that price markups respond positively to supply shocks and negatively to demand shocks. The mechanism explaining the observed markup behaviour is the same for both shocks: incomplete pass-through of changes along the marginal-cost curve to price adjustments. These observed price and output responses are consistent with dynamic demand considerations. Finally, we use our estimated shocks to show how aggregate markup fluctuations in the sample period are mostly explained by aggregate demand shocks.

scholarly journals Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan

2021 ◽  
pp. 101164
Author(s):  
Youngmin BAEK ◽  
Kazunobu HAYAKAWA ◽  
Kenmei TSUBOTA ◽  
Shujiro URATA ◽  
Kenta YAMANOUCHI
Keyword(s):  
Firm Level ◽  
Level Data ◽  
Firm Level Data ◽  
Pass Through

scholarly journals The Rise of Market Power and the Macroeconomic Implications*

2020 ◽  
Vol 135 (2) ◽  
pp. 561-644 ◽  
Author(s):  
Jan De Loecker ◽  
Jan Eeckhout ◽  
Gabriel Unger
Keyword(s):  
Market Power ◽  
Marginal Cost ◽  
Secular Trends ◽  
Profit Rate ◽  
Firm Level ◽  
The Past ◽  
Level Data ◽  
Firm Level Data ◽  
Macroeconomic Implications ◽  
The U.S

Abstract We document the evolution of market power based on firm-level data for the U.S. economy since 1955. We measure both markups and profitability. In 1980, aggregate markups start to rise from 21% above marginal cost to 61% now. The increase is driven mainly by the upper tail of the markup distribution: the upper percentiles have increased sharply. Quite strikingly, the median is unchanged. In addition to the fattening upper tail of the markup distribution, there is reallocation of market share from low- to high-markup firms. This rise occurs mostly within industry. We also find an increase in the average profit rate from 1% to 8%. Although there is also an increase in overhead costs, the markup increase is in excess of overhead. We discuss the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the past four decades, most notably the declining labor and capital shares as well as the decrease in labor market dynamism.

scholarly journals Importers, Exporters, and Exchange Rate Disconnect

2014 ◽  
Vol 104 (7) ◽  
pp. 1942-1978 ◽  
Author(s):  
Mary Amiti ◽  
Oleg Itskhoki ◽  
Jozef Konings
Keyword(s):  
Exchange Rate ◽  
Marginal Cost ◽  
Theoretical Framework ◽  
Market Shares ◽  
Variable Markups ◽  
Level Data ◽  
Theoretical Mechanism ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Exchange Rate Disconnect

Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that firms with high import shares and high market shares have low exchange rate pass-through. We test and quantify the theoretical mechanism using Belgian firm-product-level data on imports and exports. Small nonimporting firms have nearly complete pass-through, while large import-intensive exporters have pass-through around 50 percent, with the marginal cost and markup channels contributing roughly equally. (JEL D24, F14, F31, L60)

A Note on the Calculation of Firm-specific and Skill-specific Labor Costs from Firm-level Data / Zur Berechnung von qualifikations- und firmenspezifischen Arbeitskosten auf der Grundlage von Firmendaten

2000 ◽  
Vol 220 (5) ◽  
Author(s):  
Ulrich Kaiser
Keyword(s):  
Survey Data ◽  
Labor Cost ◽  
Data Sets ◽  
Labor Costs ◽  
Firm Level ◽  
Simple Method ◽  
Aggregated Data ◽  
Level Data ◽  
Firm Level Data ◽  
Total Labor

SummaryVirtually all empirical firm-level studies on the demand for heterogeneous labor do not include labor cost in the econometric specification. This is due to the fact that business and innovation survey data usually lack differentiated information on labor cost. This paper shows how reliable skill-specific and firm-specific labor cost can be calculated from firm-level data on the basis of information on total labor cost and firms' skill mix only. The simple method proposed here is applied to German innovation survey data.Three consistency checks are performed: (i) the estimated skill-specific and firm-specific labor costs are compared to aggregated data taken from official statistics, (ii) it is tested if the methods leads to "too much" variation of skill-specific labor costs within firms across time and (iii) labor costs are estimated for two different data sets and compared to reality. The consistency checks indicate that the labor cost decomposition proposed in this paper leads to reliable results.

Implicit Taxes Amid Race to the Bottom in a Global Tax Game

2020 ◽  
Vol 27 (2) ◽  
pp. 42
Author(s):  
Igor Semenenko ◽  
Junwook Yoo ◽  
Parporn Akathaporn
Keyword(s):  
Capital Mobility ◽  
Tax Rates ◽  
Corporate Tax ◽  
Firm Level ◽  
Race To The Bottom ◽  
Tax Subsidy ◽  
Tax Subsidies ◽  
Level Data ◽  
Tax Returns ◽  
Tax Hypothesis

Growing tax competition among national governments in the presence of capital mobility distorts equilibrium in the international corporate tax market. This paper is related to the literature that examines impact of international tax policies on corporate accounting statements. Employing international firm-level data, this study revisits the race-to-the-bottom hypothesis and documents that tax exemptions lowering effective tax rates relative to statutory rates increase pre-tax returns. This finding directly contradicts the implicit tax hypothesis documented by Wilkie (1992), who provided empirical evidence on inverse relationship between pre-tax return and tax subsidy. We also find evidences that relative importance of permanent versus timing component depends on the geography and that decline in corporate tax rates reduces impact of tax subsidies on profitability. Our findings suggest that tax subsidies play a different role than in 1968-1985, which was examined by Wilkie (1992). These results are consistent with the race-to-the-bottom hypothesis and income shifting explanation

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