We derive a measure of technological change from a dynamic cost minimization model that controls for imperfect competition, increasing returns and unobserved factor utilization. We estimate this measure using highly detailed panel data of a representative sample of Italian manufacturing firms for the period 1984-1997. Our key finding is that technological improvements result in a contraction of labor input on impact. In principle, this result can be reconciled with the transmission mechanism of flexible-price models by resorting to reorganization and reallocation effects. On the other hand, however, it is consistent with the predictions of a sticky-price model. Using survey information on the frequency of price revisions, we corroborate the latter interpretation, by showing that the contractionary effect of technology shocks is much stronger for firms with stickier prices. © 2003 Elsevier B.V. All rights reserved.

Price stickiness and the contractionary effect of technology shocks / Domenico J., Marchetti; Nucci, Francesco. - In: EUROPEAN ECONOMIC REVIEW. - ISSN 0014-2921. - STAMPA. - 49:5(2005), pp. 1137-1163. [10.1016/j.euroecorev.2003.08.012]

Price stickiness and the contractionary effect of technology shocks

NUCCI, Francesco
2005

Abstract

We derive a measure of technological change from a dynamic cost minimization model that controls for imperfect competition, increasing returns and unobserved factor utilization. We estimate this measure using highly detailed panel data of a representative sample of Italian manufacturing firms for the period 1984-1997. Our key finding is that technological improvements result in a contraction of labor input on impact. In principle, this result can be reconciled with the transmission mechanism of flexible-price models by resorting to reorganization and reallocation effects. On the other hand, however, it is consistent with the predictions of a sticky-price model. Using survey information on the frequency of price revisions, we corroborate the latter interpretation, by showing that the contractionary effect of technology shocks is much stronger for firms with stickier prices. © 2003 Elsevier B.V. All rights reserved.
2005
price stickiness; technology shocks; business cycle
01 Pubblicazione su rivista::01a Articolo in rivista
Price stickiness and the contractionary effect of technology shocks / Domenico J., Marchetti; Nucci, Francesco. - In: EUROPEAN ECONOMIC REVIEW. - ISSN 0014-2921. - STAMPA. - 49:5(2005), pp. 1137-1163. [10.1016/j.euroecorev.2003.08.012]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/47675
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