Factor price

About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.

The Effects of Monetary Change on Relative Commodity Prices and the Role of Long-Term Contracts

Abstract: The traditional explanation for the pattern of commodity price adjustment to monetary change, which stresses factors affecting the short-run elasticities of supply and demand in different markets, does not take into account price flexibility. This paper offers an explanation for the pattern of commodity price adjustment to monetary change based on differing degrees of price flexibility across industries, where price flexibility is determined by contract length. An extension to product markets of the theory of implicit long-term wage contracts leads to a simple hypothesis which explains the pattern of industry and sectoral price response to monetary change by implicit contract length, the latter being determined by relative price variability. Tests of this hypothesis across broad sectors and industries using postwar U.S. data produce favorable results. Also confirmed by the empirical evidence is the pattern of industry and sectoral price response to monetary change suggested by the tradition approach.

Order book approach to price impact

Abstract: Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information about potential supply and demand for a stock. The virtual price impact calculated from this information is four times stronger than the actual one and explains it only partially. However, we find a strong anticorrelation between price changes and order flow, which strongly reduces the virtual price impact and provides for an explanation of the empirical price impact function.

Small manufacturing enterprises in developing countries

Abstract: Emphasis is often placed on the promotion of small enterprises in developing countries, particularly as a means of improving the lot of unskilled workers. This focus raises questions about the relationship between establishment size and the pattern and efficiency of factor use, and about the nature and effects of price differentials in factor markets. This article goes some way toward answering these questions with data from surveys of small manufacturing enterprises in India and Colombia sponsored by the World Bank and relevant material from other countries. The article also examines India's long-standing policy, unusual among developing countries, of providing special support and protection for small enterprises. Analyses based on disaggregated data found that small firms are not reliably more labor-intensive than their larger counterparts; nor are they consistently more technically efficient in their use of resources. In light of these findings and an analysis of factor markets, this article discusses the general implications of the research results for industrial policy in developing countries.

Distortions in Factor Markets and the General Equilibrium Model of Production

Abstract: A premium paid to a factor of production in one industry over the return earned by the same factor in the other industry in a two-sector model is a distortion that affects all factor prices and the general efficiency of production. It allows for the possibility that the industry employing the higher capital-labor ratio nonetheless pays labor a higher distributive share. In such a case, commodity outputs are inversely related to commodity prices. Furthermore, the paper explores how distortions can affect the shape of the transformation schedule and the optimal strategy to be followed by a factor of production intent on maximizing its returns.

Consumption externalities and imperfect corrective pricing

Abstract: Pricing congested facilities above marginal production cost is a conventional approach to improving resource allocation. Where everyone is producing the same externality, a uniform price (in excess of marginal cost by the value of the externality) permits the competitive equilibrium to be Pareto optimal. Where individuals give rise to different externalities, but a uniform price is in effect, we have a second-best situation. When demands depend only on price, price should exceed marginal cost by a weighted average of externalities generated, the weights being the price derivatives of demand. When demands also depend on congestion, the optimal price generally diverges from this rule. The price should be lower when the individuals giving large external diseconomies per unit demanded tend to be price insensitive and congestion sensitive in their demands (relative to the average). In this case public expenditures to decrease congestion directly should not be carried to the point where the marginal direct benefit from congestion reduction equals the marginal cost. Optimal income distribution is also examined.