On What States Do Prices Depend? Answers From Ecuador

Craig Benedict, Mario Crucini () and Anthony Landry ()

No 22506, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we argue that differences in the cost structure across sectors play an important role in the decision of firms to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our analysis is that the labor-cost share of retail production differs across goods and services in the consumption basket. For example, the price of gasoline at the retail pump is predicted to adjust more frequently and by more than the price of a haircut due to the high volatility in wholesale gasoline prices relative to the wages of unskilled labor, even when both retailers face a common menu cost. This modeling approach allows us to account for some of the cross-sectional differences observed in the frequency of price adjustments across goods. We apply this model to Ecuador to take advantage of inflation variations and the rich panel of monthly retail prices.

JEL-codes: E3 E58 F3 F41 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-ene, nep-mac and nep-opm
Note: IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as CRAIG BENEDICT & MARIO J. CRUCINI & ANTHONY LANDRY, 2020. "On What States Do Prices Depend? Answers From Ecuador," Journal of Money, Credit and Banking, vol 52(8), pages 1909-1935.

Downloads: (external link)
http://www.nber.org/papers/w22506.pdf (application/pdf)

Related works:
Journal Article: On What States Do Prices Depend? Answers From Ecuador (2020)
Working Paper: On What States Do Prices Depend? Answers from Ecuador (2016)
Working Paper: On what states do prices depend? Answers from Ecuador (2016)
Working Paper: On what states do prices depend? answers from ecuador (2016)
Working Paper: On what states do prices depend? Answers from Ecuador (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:22506

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22506

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().