The micro-aggregated Phillips Curve

Daniele Aglio and Eric J. Bartelsman

No 11/2026, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper provides theory and evidence on micro-level pricing behavior needed to model an aggregate New Keynesian Phillips Curve. We start with individual firms that are heterogeneous in their production technology and in the demand curves they face. We estimate the parameters of supply and demand curves by utilizing prices and quantities of outputs and factor inputs of firms along with exogenous downstream demand instruments from global input-output and trade data. The research addresses model heterogeneity using a clustering method to classify firms according to their production technology and observed price pass-through. The results show that more productive firms exhibit a lower price response to changes in demand. We find that the aggregate price response to demand shocks will be smaller when more productive firms absorb a larger portion of demand shocks, which generally is the case. At the same time, our results imply that idiosyncratic shifts in demand to clusters of firms with more rapidly rising marginal cost curves, or cost shocks to clusters of firms with high pass-through, will result in a higher aggregate price response. Finally, this paper provides a framework to incorporate heterogeneous pricing behavior into an estimate of the slope of the aggregate Phillips Curve.

Keywords: cost pass-through; firm heterogeneity; firm-level data; micro-to-macro aggregation; Phillips Curve; production technology; Heterogenität von Unternehmen; Kostenweitergabe; Mikro-Makro-Aggregation; Phillips-Kurve; Produktionstechnologie; Unternehmensdaten (search for similar items in EconPapers)
JEL-codes: D22 D24 E31 L11 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:343095

DOI: 10.18717/dpm1dm-nd69

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