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

Domenico J. Marchetti () and Francesco Nucci
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Domenico J. Marchetti: Banca d'Italia

No 524, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: 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.

Keywords: Productivity shocks; Labor input; price stickiness (search for similar items in EconPapers)
JEL-codes: D24 E32 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-mac and nep-mic
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_524_04

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