The Effects of General Inflation and Idiosyncratic Cost Shocks on Within-Commodity Price Dispersion: Evidence from Microdata

Beaulieu, J. Joseph; Mattey, Joe P.

doi:10.1162/003465399558184

Cited by 12 publications

(5 citation statements)

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“…In a recent article based on unpublished data of the Bureau of Labour Statistics, Bils and Klenow (2004) observe 'much more frequent price changes than reported in most previous studies, with half of goods displaying prices that last 4.3 months or less'. At the same time, looking at data on changes in input prices in a large panel data of US manufacturing firms, Beaulieu and Mattey (1999) find large variation in idiosyncratic cost shocks. 6 Note that this work is inspired by the article of Klette and Griliches (1996) where quality is not explicitly considered.…”

Section: Theoretical and Econometric Frameworkmentioning

confidence: 99%

Assessing the effects of measurement errors on the estimation of production functions

Ornaghi

2006

J of Applied Econometrics

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SUMMARYThis article explores to what extent the poor results that are often found when estimating parameters of production functions can be attributed to measurement errors, due to the use of common price deflators across firms. Because of the lack of detailed micro-economic data, econometricians have to rely on industrywide deflators when computing outputs and intermediate inputs. A unique feature of the longitudinal data used in this paper is that it reports firm-level prices. This allows for a comparative assessment of production function parameters where the outputs and intermediate inputs are computed using both firm-specific prices and industry-wide deflators. The empirical results presented in this paper show that the use of common deflators across firms leads to lower scale estimates, mainly because of a large downward bias in the estimated coefficients for labour.

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Section: Theoretical and Econometric Frameworkmentioning

confidence: 99%

Assessing the effects of measurement errors on the estimation of production functions

Ornaghi

2006

J of Applied Econometrics

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“…Critics have strongly disagreed with the conclusions of Vining and Elwertowski, Parks, and their successors, Driffil, Mizon, and Ulph (1990) Domberger (1987) examined the movements of prices of goods within 4-digit SICS in the UK, while Beaulieu and Mattey (1994) looked within commodity groups in the US, Van Hoornissen (1988), Tommasi (1993) and Lath and Tsiddon (1992) used data on the same product across different stores in countries which were experiencing high rates of inflation.4 These studies generally repofied a positive relationship between inflation and price variability.…”

Section: Rpv -Pagementioning

confidence: 99%

Relative Price Variability and Inflation: Evidence from U.S. Cities

Debelle¹,

Lamont²

1997

Journal of Political Economy

100

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We test whether the time-series positive correlation of inflation and intermarket relative price variability is also present in a cross-section of US cities. We find this correlation to be a robust empirical regularity: cities which have higher than average inflation also have higher than average relative price dispersion, ceteris paribus, This result holds for different periods of time, different classes of goods, and across different time horizons. Our results suggest that at least part of the relationship between inflation and relative price variability cannot be explained by moneta~factors.

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“…They proposed the use of expenditures and revenues as proxies for input and output quantities under the assumption that prices were homogeneous across firms. In practice, the literature has documented significant dispersions in both input and output prices across firms and over time (Dunne and Roberts, ; Roberts and Supina, , ; Beaulieu and Mattey, ; Bils and Klenow, ; Ornaghi, ; Foster et al., ; Kugler and Verhoogen, ). Klette and Griliches () show that the consequence of ignoring the output price dispersion is a downward bias in the scale estimate of production function .…”

Section: Introductionmentioning

confidence: 99%

Production Function Estimation With Unobserved Input Price Dispersion

Grieco

Zhang

2016

Int Economic Review

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We propose a method to consistently estimate production functions in the presence of input price dispersion when intermediate input quantities are not observed. The traditional approach to dealing with unobserved input quantities-using deflated expenditure as a proxy-requires strong assumptions for consistency. Instead, we control for heterogeneous input prices by exploiting the first order conditions of the firm's profit maximization problem. Our approach applies to a wide class of production functions and can be extended to accommodate a variety of heterogeneous intermediate input types. A Monte Carlo study illustrates that the omitted price bias is significant in the traditional approach, while our method consistently recovers the production function parameters. We apply our method to a firm-level data set from Colombian manufacturing industries. The empirical results are consistent with the prediction that the use of expenditure as a proxy for quantities biases the elasticity of substitution downward. Moreover, using our preferred method, we provide evidence of significant input price dispersion and even wider productivity dispersion than is estimated using proxy methods.

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The Effects of General Inflation and Idiosyncratic Cost Shocks on Within-Commodity Price Dispersion: Evidence from Microdata

Cited by 12 publications

References 14 publications

Assessing the effects of measurement errors on the estimation of production functions

Assessing the effects of measurement errors on the estimation of production functions

Relative Price Variability and Inflation: Evidence from U.S. Cities

Production Function Estimation With Unobserved Input Price Dispersion

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