On what states do prices depend? answers from ecuador

Craig Benedict, Mario Crucini () and Anthony Landry ()

No 278, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: In this paper, we argue that differences in the cost structure across sectors play an important role in the decision of firms to adjust their prices. We develop a menu cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our analysis is that the labor-cost share of retail production differs across goods and services in the consumption basket. For example, the price of gasoline at the retail pump is predicted to adjust more frequently and by more than the price of a haircut due to the high volatility in wholesale gasoline prices relative to the wages of unskilled labor, even when both retailers face a common menu cost. This modeling approach allows us to account for some of the cross-sectional differences observed in the frequency of price adjustments across goods. We apply this model to Ecuador to take advantage of inflation variations and the rich panel of monthly retail prices.

JEL-codes: E3 E5 F3 F33 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-08-12
New Economics Papers: this item is included in nep-ene, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On What States Do Prices Depend? Answers From Ecuador (2020)
Working Paper: On What States Do Prices Depend? Answers from Ecuador (2016)
Working Paper: On what states do prices depend? Answers from Ecuador (2016)
Working Paper: On What States Do Prices Depend? Answers From Ecuador (2016)
Working Paper: On what states do prices depend? Answers from Ecuador (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:278

DOI: 10.24149/gwp278

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