Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms
pubblished in "Economic Modelling" elsevier vol. 29 (4) (2012) pp. 1106-1118
In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large... more
In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large part of Italian firms. In our view, “the black boxes” to examine are the relations between price setting, market structure and spatial disparities. The paper aims to extend the empirical literature in several directions. A first goal of the research is to investigate the link between heterogeneity in price changes and spatial dependence. Besides, we compare the price dynamics among sectors, namely manufacturing vs. service. It is irrefutable that prices stickiness is linked to good market rigidities. Consequently, these issues have extremely important policy implications; for instance, the Monetary Authority considers the macro price indexes in order to determine the right policy to stabilize the economy and to improve social welfare. However, the Central Bank does not distinguish the likely aggregation bias source from the cross sector–region–country heterogeneities.
Overall, the purpose of this paper is to provide an analysis of survey data that allows us to collect important aspects for Economic Policy analysis, which could not be drawn from analysis with “mesoeconomic” or aggregate data. Finally, we provide empirical evidence that price dynamic heterogeneity across geographical areas, as well as disparities across industries, are statistically significant in our microeconometric models. Indeed, the probability that industries in the backward areas change prices is 30% less than in more developed regions (Northeast). In addition, we find that sectoral diversity counts especially across goods and service industries, even if this outcome is not always robust across microeconometric specifications.
Are real entry wages rigid over the business cycle?
Stüber, Heiko (2012): Are real entry wages rigid over the business cycle? Empirical evidence for Germany from 1977 to 2009. IAB-Discussion Paper, 06/2012.
So far little empirical evidence exists on how real wages of newly hired workers react to business cycle conditions.... more So far little empirical evidence exists on how real wages of newly hired workers react to business cycle conditions. This paper aims at filling this gap for Germany by analyzing the cyclical behavior of real wages of newly hired workers while controlling for 'cyclical upgrading' and 'cyclical downgrading' in employee/employer matches over the cycle. The analysis is undertaken for the 1977 to 2009 period using administrative longitudinal matched employer-employee wage data. I find that an increase in the unemployment rate of one percentage point decreases the real wages of job entries within given firm-jobs by about 1.27 percent. In light of the magnitude of the entry-wage cyclicality it seems that introducing wage rigidity in the Mortensen-Pissarides model in order to amplify realistic volatility of unemployment is not supported by the data. Further I show that the procyclicality of the employment/ population ratio is identical to the procyclicality of real entry wages. This counters the view of many macroeconomists that wages are much less cyclical than employment and unemployment."
Family prestige as old-age security: Evidence from rural Senegal
This paper aims at studying the self-enforcing family contract between a migrant son and his ageing father who... more This paper aims at studying the self-enforcing family contract between a migrant son and his ageing father who remained in the village and expects to receive support. In 2004, a household survey conducted in the Senegal River Valley was especially designed to account for the complex socio-political structure of the local institutions. The empirical results suggest that the social rank of the family within the village is a key to the enforcement mechanisms at work. Indeed, while belonging to a prestigious family lowers the probability of migrating, it raises the probability of frequently remitting to the patriarch. Conversely, sons from historically disadvantaged groups are more likely to both migrate and cut ties with their village of origin, including their family. Additional qualitative evidence is rather suggestive that despite their economic success, low status migrants keep being stigmatized in their village of origin. Hence, inheriting his father's dominant position in the village represents a strong incentive for a migrant son from a high-ranked family to remit. Under such circumstances, patriarchs from prestigious families only, can actually rely on their migrating sons as old-age security.
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Download (.pdf) La Demanda de Alimentos en Argentina. Una Estimación de un Modelo LA-AIDS con Datos de Encuesta de Hogares
Co-autored with G. Rossini and E. Depetris de Guiguet
en Anales de la AAEP, Cordoba, 2008
Mixed Signals: To what extent does wage scarring vary with the characteristics of the local labour market?
by Philip Ball
"Draft only, e-mail for latest version."
Continuous work-life histories are constructed using matched BHPS-LFS data, in order to test for regional variation in... more Continuous work-life histories are constructed using matched BHPS-LFS data, in order to test for regional variation in the impact of unemployment experience on future wage growth. The main hypothesis under test is whether unemployment spells experienced in high unemployment regions are seem by future employers as more a characteristic of the region than a negative productivity signal. Consistent with previous studies, empirical results highlight signi cant and persistent average wage penalties due to interruption that depends on previous labour market status. Strong regional di erences are found in the impact of redundancy on wage growth. This is contingent on the labour market tightness and urbanity of the regional in which this unemployment was experienced. However, no evidence is found supporting the main hypothesis in the UK. It is likely that human capital explanations still play a substantial role, given that average unemployment durations are likely to be lower in tight labour markets with better re-employment prospects.
Construction of a linked postcode district to regional-level dataset for Great Britain.
by Philip Ball
A one-to-one link is developed between overlapping sub-regional entities using geographical tools newly available to... more A one-to-one link is developed between overlapping sub-regional entities using geographical tools newly available to the Economic Research Community. The aim of this project is to create a database exploiting the geographical variation in publicly available data, in order to better control for regional heterogeneity. The database covers the period 1995 to 2007, and includes regional identi ers at the postcode district, Local Authority, NUTS3 and Travel-To-Work Area levels of aggregation. Roughly 160 controls are available to the researcher. This data could be used to provide new insights for Regional Policy Analysis. An example of an application of this resource in the context of unemployment duration can be found in (Ball and Wilke, 2009) for the UK.
"Job seeker's allowance in Great Britain: How does the regional labour market affect the duration until job finding?"
by Philip Ball
Co-authored with Dr. Ralf Wilke.
Employing a large individual-level administrative dataset from Great Britain, covering the period 1999-2007, we... more Employing a large individual-level administrative dataset from Great Britain, covering the period 1999-2007, we analyse the factors influencing the length of unemployment benefits claimant periods with subsequent transition to re-employment. To this end, this individual-level data is merged with a group of regional indicators to control for relevant regional labour market characteristics. From a methodological point of view, we adopt a flexible censored quantile regression approach to estimating conditional re-employment hazards. Our results indicate that the individual characteristics of an unemployed person are generally more important than the regional labour market conditions. However, regional labour supply and demand conditions are important determinants for the length of unemployment compensation claim periods. Our analysis provides evidence that large cities such as London and Birmingham provide the worse local labour market conditions for job seekers allowance recipients, while remote regions like the Shetland islands perform among the best.
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Regional price levels and the agglomeration wage differential in western Germany
Co-authored with Uwe Blien, Hermann Gartner and Katja Wolf. Published in 'The Annals of Regional Science', 2009, vol. 43, issue 1, pages 71-88.
We analyse whether wage differences between cities and rural areas in western Germany are due to unobserved... more We analyse whether wage differences between cities and rural areas in western Germany are due to unobserved differences in regional price levels. Since regional prices are available for only 10% of the regions we use multiple imputation to generate prices for all regions. Our results show that the nominal agglomeration wage differential is 25%, whereas the real differential is 19%. If we control for the composition of the labour force and jobs, the real wage differential is 4%. If we additionally control for differences in regional building land prices the agglomeration wage differential vanishes.
Does Downward Nominal Wage Rigidity Dampen Wage Increases?
A revised version of this paper will be published in the European Economic Review.
Co-authored with Thomas Beissinger. FZID Discussion Paper 2010-22. A previous version of this paper has been published in 2010 as IAB DP 16/2010 & IZA DP 5126.
Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity... more Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.