The importance of sticky prices in business cycle fluctuations has been debated for many years. But we argue, based on a large empirical literature from the 1950's and 60's, that it is necessary to distinguish the response of price to an increase in factor prices from its response to an increase...

Manufacturers' finished goods inventories move less than shipments over the business cycle. We argue that this requires marginal cost to be more procyclical than is conventionally measured. We construct, for six manufacturing industries, alternative measures of marginal cost that attribute...

A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal...

For decades, economists have used the hedonic model to estimate demands for the implicit characteristics of differentiated commodities. The traditional cross-sectional approach can recover marginal willingness to pay for characteristics, but has faltered over a difficult endogeneity problem for...

How does an increase in the size of the market due to fertility, immigration, or trade integration, affect welfare and real GDP? We study this question using a model with heterogeneous firms, fixed costs, and monopolistic competition. We decompose the change in welfare into changes in technical...

In this paper, we study ability peer effects in secondary schools in England and identify which segments of the peer ability distribution drive the impact of peer quality on students‟ achievements. To do so, we use census data for four cohorts of pupils taking their age-14 national tests, and...

At the firm level, revenue and costs are well measured but prices and quantities are not. This paper shows that because of these data limitations estimates of returns to scale at the firm level are for the revenue function, not production function. Given this observation, the paper argues that,...

Pricing complementarities play a key role in determining the propagation of monetary disturbances in sticky price models. We propose a procedure to infer the degree of firm-level pricing complementarities in the context of a menu cost model of price adjustment using data on prices and market...

This study develops a model of endogenous growth based on increasing returns due to firms' technology choices. Particular attention is paid to the implications of these choices, combined with the substitution of capital for labor, on economic growth in a general equilibrium model in which the...