explaining the border effect the role of exchange rate variability shipping costs and geography this paper exploits a three dimensional panel data set of prices on 27 traded goods over 88 quarters across 96 cities in the us and japan we show that a simple average of good level real exchange rates tracks the nominal exchange rate well suggesting strong evidence of sticky prices focusing on dispersion in prices between city pairs we find that crossing the us japan border is equivalent to adding as much as 43 000 trillion miles to the cross country volatility of relative prices we turn next to economic explanations for this so called border effect and to its dynamics distance unit shipping costs and exchange rate variability collectively explain a substantial portion of the observed international market segmentation relative wage variability on the other hand has little independent impact on segmentation 2001 elsevier science b v all rights reserved

involuntary unemployment and implicit contracts this paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers involuntary unemployment is defined as a situation where ex post gains to trade exist a model of labor contracts is developed where the allocations are not ex post optimal it is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment

the impact of climate on the law of one price a test using north american food prices from the 1920s using grocery price data for over 100 urban locations across the us and canada from the 1920s we show that deviations from the law of one price lop were strongly related to climate differences the effect of climate has a large impact on the elasticity of deviations from lop with respect to distance while having no impact on the border effect we then test a counterfactual to show that the relationship between deviations from lop and temperature does not hold when historical temperature data are replaced with contemporary this is evidence that climate impacts production l impact du climat sur la loi du prix unique un test utilisant les prix de la nourriture en amerique du nord dans les annees 1920 a l aide de donnees sur les prix de la nourriture dans les epiceries dans plus d une centaine de villes aux etats unis et au canada dans les annees 1920 on montre que les deviations par rapport a la loi du prix unique lpu sont fortement reliees aux differences dans le climat l effet du climat a un grand impact sur l elasticite des deviations par rapport a la lpu par rapport a la distance mais aucun impact sur l effet de frontiere on utilise alors un test contrefactuel pour montrer que la relation entre les deviations par rapport a la lpu et la temperature ne tient pas quand on remplace les temperatures historiques par les temperatures contemporaines ceci montre que le climat a un impact sur la production

price setting during low and high inflation evidence from mexico this paper provides new insight into the relationship between inflation and the setting of individual prices by examining a large data set of mexican consumer prices covering episodes of both low and high inflation when the annual rate of inflation is low below 10 15 the frequency of price changes comoves weakly with inflation because movements in the frequency of price decreases and increases partly offset each other in contrast the average magnitude of price changes correlates strongly with inflation because it is sensitive to movements in the relative shares of price increases and decreases when inflation rises beyond 10 15 few price decreases are observed and both the frequency and average magnitude are important determinants of inflation i show that a menu cost model with idiosyncratic technology shocks predicts the average frequency and magnitude of price changes well over a range of inflation similar to that experienced by mexico

an adverse selection model of optimal unemployment insurance abstract we ask whether offering a menu of unemployment insurance contracts is welfare improving in a heterogeneous population we adopt a repeated moral hazard framework as in shavell and weiss 1979 supplemented by unobserved heterogeneity about agents job opportunities our main theoretical contribution is a quasi recursive formulation of our adverse selection problem including a geometric characterization of the state space our main economic result is that optimal contracts for bad searchers tend to be upward sloping due to an adverse selection effect this is in contrast to the well known optimal decreasing time profile of benefits in pure moral hazard environments that continue to be optimal for good searchers in our model

optimal unemployment insurance and experience rating in the presence of asymmetric information adding a public unemployment insurance ul to labor contracts is potentially pareto improving unfortunately most successful mechanisms are manipulable by coalitions this leads us to design coalition incentive compatible ui systems their welfare effect depends on which coalitions are feasible whenever firm ui coalitions may form one ends up with an impossibility result as contracts are made coalition proof they no longer pareto dominate firm worker contracts however if only firm worker coalitions are feasible the public ui is strictly pareto improving even though it cannot implement the welfare levels that would be reached if no coalition were feasible at all

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

price changes in the euro area and the united states some facts from individual consumer price data prices of goods and services do not adjust immediately in response to changing demand and supply conditions this paper characterizes the average frequency and size of price changes in the euro area and its member countries investigates the determinants of the probability of price changes and compares the evidence for the euro area with available u s results the facts documented in this paper are based on evidence from individual price data recorded at the store level in all euro area countries except ireland and greece that is in datasets covering austria belgium finland france germany italy luxembourg the netherlands portugal and spain which together account for around 97 percent of euro area gdp the data used are the monthly price records underlying the computation of national consumer price indices and harmonized consumer price indices these data cover a large number of products selected on the basis of extensive household budget surveys

menu costs and markov inflation a theoretical revision with new evidence abstract we revisit a foundational theoretical paper in the menu cost literature sheshinski and weiss 1983 optimum pricing policy under stochastic inflation review of economic studies 50 3 513 529 one of the few to treat stochastic inflation with persistent deviations from trend in contrast to the original finding we show that optimal pricing in this environment entails using different s s bands in high inflation and low inflation states of the world the low inflation band is strictly contained within the high inflation band this revised solution has very different implications from the original one firms are generally risk loving not risk averse with respect to inflation an increase in the variance of inflation increases price dispersion when inflation is high and decreases price dispersion when inflation is low on an aggregate level this optimal pricing would lead to bunching of prices and non neutrality of money in the setting of caplin and spulber 1987 menu costs and the neutrality of money quarterly journal of economics 102 4 703 725 to test the main finding we construct an establishment level dataset from the months surrounding mexico s tequila crisis in 1995 in the high inflation state price increases are larger and establishments allow their prices to vary more widely around their respective long run mean relative prices cross establishment price dispersion is lower but this result seems due to decreased establishment heterogeneity rather than narrower s s bands overall the evidence suggests that establishments employ wider s s bands in the high inflation state

dynamic cournot duopoly with intertemporal capacity constraints this paper studies a dynamic cournot duopoly in which suppliers have a limited amount of products available for two consecutive periods we derive optimal sales strategies and analyze welfare effects with and without commitment under commitment strategies do not depend on the rival s realized sales in this case there is a unique nash equilibrium for any allocation of initial supplies and prices increase over time absent commitment sellers can adjust their supply decision after the first period in this case a subgame perfect nash equilibrium does not always exist and prices may decline over time a more asymmetric allocation of stocks generally leads to higher first period prices whereas the impact on second period prices is ambiguous the larger firm typically prefers not to commit whereas the smaller firm is better off under commitment commitment generates a higher total surplus and almost always a higher consumer surplus our findings thus suggest that market transparency or flexible supply contracts can adversely affect welfare in situations where production precedes sales and firms face an intertemporal capacity constraint

nominal rigidities and retail price dispersion in canada over the twentieth century we introduce a new data set on over 230 000 monthly prices for 10 goods in 50 canadian cities over the 40 year period from 1910 to 1950 this information coupled with previously published price information from the late twentieth century allows us to present one of the first comprehensive views of nominal rigidities and retail price dispersion over the past 100 years we find that nominal rigidities have been conditioned upon prevailing rates of inflation with a greater frequency of price changes occurring in the 1920s and the 1970s additionally the process of retail market integration has followed a u shaped trajectory with many domestic markets being better integrated as measured by the average dispersion of retail prices at mid century than in the 1990s we also consider the linkages between nominal rigidities and price dispersion finding results consistent with present day data on utilise des donnees inedites de 230 000 prix mensuels pour 10 produits dans 50 villes canadiennes au cours de la periode de quarante ans qui va de 1910 a 1950 ces donnees ajoutees aux renseignements deja publies anterieurement sur les prix dans la derniere portion du vingtieme siecle permettent de presenter l un des premiers portraits comprehensifs des rigidites nominales et de la dispersion des prix de detail au cours des derniers 100 ans on decouvre que les rigidites nominales ont ete influencees par les taux d inflation qui ont prevalu avec pour consequence une plus grande frequence de changements de prix dans les annees 1920s et 1970s de plus chose surprenante le processus d integration du marche de detail a suivi une trajectoire en u plusieurs marches domestiques etant davantage integres en prenant comme mesure la dispersion moyenne des prix de detail au milieu du siecle que dans les annees 1990s on examine aussi les liens entre rigidites nominales et dispersion des prix et les resultats concordent avec ce que revelent les donnees recentes

two period dynamic versus fixed ratio pricing in a capacity constrained duopoly this paper analyzes the impact of dynamic and fixed ratio pricing policies on firm profits and equilibrium prices under competition firms that have equal inventories of perfectly substitutable and perishable products compete for customer segments that demand the product at different times in each period customers first purchase from the low price firm and then from the high price firm up to their inventories provided the prices are lower than the maximum they are willing to pay the main conclusions of this paper are as follows although dynamic pricing is a more sophisticated policy than fixed ratio pricing it may lead to decreased equilibrium profits under both pricing policies one firm assumes the role of a low cost high output firm while the other assumes the role of a high cost low output firm and the supply demand ratio has more impact on the outcome of the competition than the heterogeneity in consumer reservation prices

price index convergence among united states cities we study the dynamics of price indices for major u s cities using panel econometric methods and find that relative price levels among cities mean revert at an exceptionally slow rate in a panel of 19 cities from 1918 to 1995 we estimate the half life of convergence to be approximately nine years the surprisingly slow rate of convergence can be explained by a combination of the presence of transportation costs differential speeds of adjustment to small and large shocks and the inclusion of nontraded goods prices in the overall price index do price indices in major u s cities share a common trend and if so how quickly do they revert to that trend following a local shock to the price index to answer this question we study the dynamics of consumer price indices for 19 major u s cities over the period from 1918 to 1995 the panel time series methods we employ are now commonly used for studying real output growth rates and levels of real exchange rates across countries we estimate that price index divergences across u s cities are temporary but surprisingly persistent with a half life of nearly nine years our research has two primary motivations first we hope to gain a better understanding of the sources of persistence in the deviations from purchasing power parity ppp found in studies of national price indices and exchange rate data second and more importantly we see the european monetary union as having many similarities to the united states and believe that studying the behavior of prices across u s cities will help us in understanding the likely nature of inflation convergence in the euro area the european central bank s stated inflation objective is a year on year change in the harmonized index of consumer prices hicp of not more than 2 but how large might we expect regional deviations from this euro area wide average to be and how long are they likely to persist the lack of data prevents us from answering this question directly using european prices under monetary union instead we look to the united states a mature common currency area of similar regional diversity size and industrial development

unemployment insurance and labor contracts under asymmetric information theory and facts the paper provides evidence to show that many u s labor contracts havelittle or no private unemployment insurance provision a model of an optional contract under asymmetric information with no private unemployment insurance is presented underemployment and involuntaryunemployment may coexist copyright 1986 by american economic association

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

the law of one price intranational evidence for canada this study investigates the behaviour of intranational prices for 45 specific consumer goods across 25 canadian cities it finds positive roles for distance and provincial borders in intercity price disparities while sizable the provincial border effect is an order of magnitude smaller than the estimates for the canada u s border a majority of the intercity relative price series are stationary around small mean values indicating that long run price differences are close to zero the intercity prices converge at rates considerably faster than the consensus estimates for international prices in fact half lives for intercity price deviations average well under a year jel classification f15 f31 la loi d un seul prix resultats intra nationaux pour le canada ce memoire examine le comportement des prix intra nationaux de 45 biens de consommation specifiques dans 25 villes canadiennes il semble que la distance et les frontieres inter provinciales ont un impact sur les differentiels de prix entre villes meme si l impact des frontieres inter provinciales est important il est beaucoupplus petit que l impact de la frontiere canada u s une majorite des series de prix relatifs entre villes sont stationnaires autour de petites valeurs moyennes ce qui suggere que les differences de prix a long terme s approchent de zero il est clair que les prix entre villes convergent a des taux considerablement plus rapides que ce qu on observe au niveau international en fait les deviations de prix entre villes ont une esperance de vie qui en moyenne est de moins d un an

number of sellers average prices and price dispersion abstract a variety of models provide differing predictions regarding the effect of an increase in the number of competitors in a market seller density on prices and price dispersion we review different approaches to generating equilibrium price dispersion and then empirically estimate the relationship between seller density average product price and price dispersion in the retail gasoline industry using four unique gasoline price data sets controlling for station level characteristics we find that an increase in station density consistently decreases both price levels and price dispersion across four geographical areas

efficient labor contracts with employment risk this article analyzes efficient employment agreements where the demand for consumption insurance can be satisfied by noncontractual means we assume that workers can save and that consumption is determined by a strong form of the permanent income hypothesis under conditions of asymmetric information about exogenous shocks to labor demand we derive a unique compensation schedule that efficiently guides decisions by both workers and employers efficient employment outcomes are generated without a need for third party enforcement or monitoring and workers choose a consumption policy that leaves them indifferent among realizations of labor demand within this solution it is both costless and efficient for workers to delegate employment decisions to the firm within the context of the model we analyze implications for the equilibrium distribution of wages and for empirical studies of labor supply

existence and persistence of price dispersion an empirical analysis the hebrew university of jerusalem and nber using a unique data set on store level monthly prices of four homogenous products sold in israel i study the existence and characteristics of the dispersion of prices across stores as well as its persistence over time i find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity moreover intra distribution mobility is significant stores move up and down the cross sectional price distribution thus consumers cannot learn about stores that consistently post low prices as a consequence price dispersion does not disappear and persists over time as predicted by varian s 1980 model of sales

the law of one price without the border the role of distance versus sticky prices we examine the role of nominal price rigidities in explaining the deviations from the law of one price lop across cities in japan focusing on intra national relative prices isolates the border eect and thus enables us to extract the pure eect of sticky prices a two city model with nominal rigidities and transportation costs predicts that the variation of lop deviations is lower for goods with less frequent price adjustment after controlling for the distance separating the cities using retail price data for individual goods and services collected in japanese cities we find strong evidence supporting this prediction adapting the engel and rogers 1996 regression framework to our theoretical setting we quantify the separate roles of nominal rigidities and trade costs proxied by distance in generating lop variability our estimates suggest that the distance equivalent of nominal rigidities can be as large as the width of the border typically found in the literature on international lop deviations the findings point to both the utility of the regression framework in identifying qualitative eects i e sign of a coecient and the challenges interpreting their quantitative implications

trade unions and economic efficiency in this paper i shall investigate a role for trade unions in increasing economic efficiency this role is enabling an improvement in the allocation of riskbearing between a firm and its employees the essential idea is straightforward if employers and employees are both risk averse the optimal wage contract will not leave one party bearing all the risk if state contingent contracts are possible grossman and hart 1981 give several reasons for firms being risk averse that firms are indeed risk averse would seem to follow from the fact that employees bear substantial risks few firms offer a job for life at a guaranteed real wage employees bear the risks of layoff redundancy and changes in the real value of their earnings with transactions costs in finding and moving to another job which may be substantial in periods of high unemployment these are real risks yet the states of the world in which these eventualities are to occur are rarely specified in any legally enforceable form indeed it is hard to imagine that they ever could be both because of the problem of envisaging all the relevant states of the world the bounded rationality of simon 1979 and because of the problem of defining those states in such a way that the courts could in the event of a dispute decide which state had occurred in the absence of legal enforceability of state contingent contracts the analysis depends on whether or not decisions about production must be made before a firm knows which state has occurred if they do not have to be then it is not essential to negotiate any contract before the firm knows the state but it may still be desirable from a risk sharing point of view to have a long term contract covering different possible states for that case hall and lilien 1979 and grossman and hart 1981 have argued that some degree of state contingency may be achieved by negotiating a contract which allows the firm in the light of the state which occurs to choose between limited combinations of employment and wages the firm may for example be permitted to reduce wages under the contract but only at the expense of reducing employment so that it is only in its interest to do so if marginal productivity is low this can overcome some of the moral hazard problems arising when states are observed only by firms but as grossman and hart show only at the cost of pareto inefficiency in the employment contract at an empirical level it may explain provisions for compulsory overtime at premium rates this type of contract will work only in the case in which the firm observes the state of the world before making employment decisions but given that

a model of rationing and labour supply theory and estimation a number of authors most prominently clower 1965 and leijonhofvud 1968 have interpreted keynes s theory of unemployment as a disequilibrium model nominal price and wage rigidity prevent the labour market from clearing the actual level of employment is given by the minimum of the effective demand for labour and the effective supply general disequilibrium models of income and employment determination have been developed by barro and grossman 1976 and malinvaud 1977 the model has been extended to the open economy by dixit 1978 and to a two period rational expectations context by neary and stiglitz 1979 the econometric implications of the disequilibrium approach have been developed by goldfeld and quandt 1972 maddala and nelson 1974 and rosen and quandt 1978 among others in summary the disequilibrium approach has provided a fruitful context for analysing macroeconomic behaviour in a competitive walrasian system the notional supply of labour is defined as the amount of labour a worker wishes to provide when he can buy and sell as much as he would like in all markets subject only to his budget constraint and given prices and wages the notional supply of labour then is given by l where 1 c attains the indirect utility function

competitive capacity expansion under demand uncertainty abstract we analyze the capacity expansion behavior of firms in a duopoly faced with an uncertain new market the market demand may be high or low with a given probability mass function firms obtain private information about the market size and build their capacity before the market demand is known once the demand is revealed firms enter a capacity constrained price competition phase which determines their revenues two scenarios are considered first when firms choose their capacities simultaneously in the investment phase and second when they do so sequentially for each case we determine the unique symmetric nash equilibrium excess capacity can occur in equilibrium in the industry it is seen that preempting the competitor in the capacity expansion phase offers first mover benefits we argue that the sequential moves game is more prone to equilibrium excess capacity compared to the simultaneous case we show that preemption is a good strategy if the investing environment is either highly optimistic or highly pessimistic if the industry outlook is only moderately optimistic a capacity planner is still better off preempting his competitor however the industry may encounter overcapacity as a consequence

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

implicit contracts with asymmetric information and bankruptcy the effect of interest rates on layoffs this paper develops a model in which a firm writes labour contracts with workers and debt contracts with creditors firms have more information than do the owners of the factors of production and they are also subject to limited liability we show that if the limited liability constraint is binding then the employment level is inefficient relative to a situation of symmetric information the firm is then embedded into a partial equilibrium model in which the real rate of interest is exogenously determined we show that increases in the real rate of interest increase the inefficiency of the optimal employment contract and lead to layoffs in more states of nature than would occur at lower real interest rates recent literature in the area of implicit contracts has shown considerable interest in the assumption of asymmetric information henceforth a i papers by azariadis 1982 green and kahn 1982 and grossman and hart 1981 have all shown that a i will interfere with optimal risk sharing but although these models produce non walrasian outcomes it is not clear that they are capable of explaining the observed variations in employment over the business cycle in the absence of a link between the level of employment and other macroeconomic variables these new versions of contract theory are open to the charge that they are presenting a complicated explanation of frictional unemployment one potential link between variations in output and variations in intertemporal prices is suggested by models which explicitly allow for the possibility of bankruptcy sappington 1983 has shown that bankruptcy will generate inefficient outcomes even between risk neutral agents and farmer 1984 has shown that if sappington type contracts are incorporated into a macroeconomic structure then the resulting model predicts that bankruptcies will vary countercyclically over the business cycle although bankruptcy is important however it is unlikely that bankruptcies alone will account for all of the output loss during a recession the purpose of this paper is to show that the assumptions of a i and limited liability will generate a model in which the employment level is inefficient and in which the magnitude of this inefficiency varies systematically with the expected real rate of interest this model predicts that the observed increase in the incidence of layoffs during recessions is directly attributable to the effects of high interest rates on aggregate supply some evidence of the phenomenon to be explained is presented below

distance language religion and the law of one price evidence from canada and nigeria we examine the impact of physical distance language and religion on law of one price lop deviations across interwar canadian and modern nigerian cities the data comprise monthly average retail prices for narrowly defined goods collected by national statistical agencies we find that differences in the fraction of the city population sharing a common language and religion have a significant impact on lop deviations the impact of language differences is consistent with a recently developed theory in which both trade costs and differences in signal noise ratios contribute to lop deviations

insurance within the firm we evaluate the allocation of risk between firms and their workers using matched employer employee panel data unlike previous contributions this paper focuses on idiosyncratic shocks to the firm which are the correct empirical counterpart of the theoretical notion of diversifiable risk we allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially risk sharing considerations can account for about 15 percent of overall earnings variability the remainder originating from idiosyncratic shocks to individual workers our welfare calculations indicate that firms are an important vehicle of insurance provision

what can us city price data tell us about purchasing power parity abstract we study the dispersion of absolute price levels for us cities since 1918 by absolute price levels we mean price indices that measure the cost of a given consumption basket at each point in time we find strong evidence that city price levels converge over time and that the dispersion of price levels is lower for us cities than between oecd countries we argue that price level convergence for us cities will produce bilateral real exchange rate nonstationarity in this case however nonstationarity is not evidence against purchasing power parity ppp rather it is the consequence of improved market integration

a monopolistic and oligopolistic stochastic flow revenue management model this paper studies a one shot inventory replenishment problem with dynamic pricing the customer arrival rate is assumed to follow a geometric brownian motion homogeneous customers have an isoelastic demand function and do not behave strategically we find a closed form optimal pricing policy which utilizes current demand information under this pricing policy the inventory trajectory is deterministic and a retailer sells all inventory we show that dynamic pricing coordinated with the inventory decision achieves significantly higher profits than does static pricing furthermore under oligopolistic competition we establish a weak perfect bayesian equilibrium for the price and inventory replenishment game we find the pricing equilibrium to be cooperative even in a noncooperative environment but that inventory competition results in overstock and damages profits finally we examine the trade off between dynamic pricing and price precommitment and find that flexible pricing is still beneficial provided competition is not too intense

the costs of doing hard time a penitentiary based regional price index for canada 1883 1923 we construct consumer price indices for canada based mainly on the expenditure records of canada s federal penitentiaries regional price variation was much greater in canada in the late nineteenth century than in the northern u s the new data suggest substantial price decline to 1900 regional price variation in canada decreased gradually to 1914 and quickly during the first world war for 1900 14 and 1922 3 new data are largely consistent with consumer price data compiled by the labour gazette the new data suggest more inflation during the first world war on construit des indices de prix a la consommation pour le canada a partir des archives de depenses des penitenciers federaux au canada la variation regionale des prix etait plus grande au canada que dans le nord des etats unis a la fin du 19e siecle ces nouvelles donnees suggerent qu il y a eu chute substantielle des prix jusqu en 1900 la variation regionale des prix decline graduellement au canada jusqu en 1914 et rapidement durant la premiere guerre mondiale pour les periodes de 1900 14 et 1922 3 les nouvelles donnees s arriment assez bien avec les donnees sur les prix a la consommation compilees par la gazette du canada ces donnees nouvelles suggerent qu il y a eu davantage d inflation au cours de la premiere guerre mondiale

inflation and price setting in a natural experiment abstract we analyze the behavior of price setters in poland during the transition from a planned to a market economy using a large disaggregated data set the size and frequency of price changes as well as relative price variability all increase as inflation rises the effect of expected inflation on relative price variability is much stronger than the effect of unexpected inflation despite the unusual economic environment the results are qualitatively identical and quantitatively stronger than those in lach and tsiddon 1992 journal of political economy 100 349 389

a duopoly model of pricing for inventory liquidation abstract we consider the problem of pricing to liquidate inventory in a duopoly the problem is modelled as a game with complete information the unique nash equilibrium for the game which is also sequential involves mixed strategies for the sellers the equilibrium extends in a limited fashion to multi period and many seller situations

state dependent or time dependent pricing does it matter for recent u s inflation in the 1988 2004 micro data collected by the u s bureau of labor statistics for the cpi price changes are frequent every 4 7 months depending on the treatment of sale prices and large in absolute value on the order of 10 the size and timing of price changes varies considerably for a given item but the size and probability of a price change are unrelated to the time since the last price change movements in aggregate inflation reflect movements in the size of price changes rather than the fraction of items changing price due to offsetting movements in the fraction of price increases and decreases neither leading time dependent models taylor or calvo nor 1 st generation state dependent models match all of these facts some 2 nd generation state dependent models however appear broadly consistent with the empirical patterns

cost of living real wages and real incomes in thirteen canadian cities 1900 1950 price indices for thirteen canadian cities for 1900 to 1950 demonstrate large regional differences in cost of living until 1914 after 1914 regional price levels converged before the war western canadian cities had the highest cost of living after 1920 cities in ontario had the highest cost of living accounting for these trends in regional costs of living reveals that regional real wage and real income structures have been present and stable since at least 1901 thus regional wage and income disparities are long standing and persistent features of the canadian economy cout de la vie salaires reels et revenus reels dans treize villes canadiennes les indices de prix pour treize villes canadiennes entre 1900 et 1950 montrent qu il y avait de fortes differences dans le cout de la vie jusqu en 1914 apres 1914 il y a convergence des niveaux de prix regionaux avant la guerre les villes de l ouest canadien avaient le cout de la vie le plus eleve apres 1920 des villes de l ontario vont avoir le plus haut cout de la vie si l on tient compte de ces tendances regionales dans les niveaux du cout de la vie il appert que des structures de salaires et de revenus reels ont ete en place et stables depuis 1901 donc les disparites regionales de salaires et de revenus sont des caracteristiques deja anciennes et persistantes de l economie canadienne

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

yesterday s bad times are today s good old times retail price changes are more frequent today than in the 1890s this paper documents differences in the nominal rigidity of retail prices across two 28 month periods 1889 91 and 1997 99 the most striking finding is that prices changed much less frequently in 1889 91 in the late 1800s when price changes did occur they were smaller on average and more narrowly distributed with fewer small or large price changes further price changes were more permanent 100 plus years ago these differences are consistent with a high occurrence of temporary price shocks and a higher cost of changing prices in 1889 91 than in 1997 99

dynamic labor contracts under asymmetric information abstract this paper discusses the distortion of employment within a two period asymmetric information contracting model in which an exogenous demand shock is serially correlated and is known only to firms the obtained results show that serial correlations of the state of nature can cause not only underemployment but also overemployment even when overemployment never occurs in the context of a static asymmetric information contracting model

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

noisy information distance and law of one price dynamics across us cities abstract us micro price data at the city level suggests that both the volatility and the persistence of law of one price deviations are rising in the distance between us cities a standard two city equilibrium model with trade costs can predict the relationship between volatility and distance but not between persistence and distance we show that if there is imperfect information about the state of nominal aggregate demand with noisy signals that are asymmetric across cities then distance and persistence will be positively correlated our main results are shown to be robust to the introduction of sticky prices and multiple cities

labor market equilibrium with rehiring consistent with the empirical evidence this article analyzes a labor market in which separations are not permanent and reactivated firms prefer to rehire former employees instead of seek new ones workers engage in job search due to the uncertain prospects of rehiring if firms can commit to wages contingent on rehiring they backload wages to provide incentives for workers to reduce their unobservable search effort under risk aversion and incomplete markets if productivity at reactivation is sufficiently high the tension between wage backloading and consumption smoothing leads to excessive search in equilibrium

equilibrium long term labor contracts the paper presents a labor market equilibrium analysis of implicit contract theory a two period single good model is used to propose consistent notions of labor market equilibrium for long term employment contracts both when labor is specialized and cannot move in the second period and when there is free mobility without costs the result that long term contracts emerge in equilibrium even without mobility costs is novel and contrary to common beliefs the main features of equilibrium are that risk neutral firms will insure risk averse workers against downside risk yielding downward rigid wages wages are not fully rigid as in earlier work on contract theory because workers may quit and wages have to be bid up to retain them the firm gets its return of the insurance deal by paying less than marginal product in the first period the resulting equilibrium is second best and lies between productive efficiency and full insurance workers gain from long term contracts in comparison to spot markets whereas owners may not in the model with specialized skills there exist transfer payments such that both parties are better off within an equilibrium with long term contracts

the disintegrating canadian labour market the extent of the market then and now analysis of real wages for three occupations in 13 canadian cities for 1901 50 suggests canada had a national labour market at least until 1950 however analysis of real wages for 10 canadian cities for 1971 2000 yields little evidence favouring integration of canada s regional labour markets the apparent lack of labour market integration reflects a weakness of an approach that assumes markets are in equilibrium unemployment rates after 1970 suggest that some regional markets may be characterized by excess labour supply analysis of relative provincial unemployment rates yields evidence consistent with local labour force adjustment to changing labour market conditions jel classification e24 j61 le marche du travail en desintegration au canada l etendue du marche alors et maintenant les auteurs analysent les salaires reels pour trois occupations dans 13 villes canadiennes au cours de la periode 1901 50 et suggerent que le canada a joui d un marche du travail qui etait national tout au moins jusqu a 1950 toutefois l analyse des salaires reels dans 10 villes canadiennes au cours de la periode 1971 2000 ne fournit pas de resultats supportant l idee d integration des marches regionaux du travail on suggere que le manque apparent d integration du marche du travail est l effet d echo d une approche qui presume que les marches sont en equilibre la periode de l apres 1970 en est une ou les taux de chomage suggerent plutot que certains marches regionaux peuvent etre raisonnablement caracterises comme definis par une offre excedentaire de travail une analyse des taux de chomage provinciaux relatifs revele que la force de travail locale s ajuste aux conditions changeantes du marche du travail