Topic
Factor price
About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.
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TL;DR: In this article, the behavior of a small open economy facing perfectly elastic supply curves for some of its productive factors is examined, and it is shown that, as more and more factor-price rigidities are imposed on an economy, it comes closer to a state of factor price equalization.
Abstract: This paper examines the behavior of a small open economy facing perfectly elastic supply curves for some of its productive factors. In particular, the paper derives some comparative statics properties of such economies, compares them with the properties of otherwise identical economies in which all factor prices are determined endogenously, and investigates the relationship between factor-price rigidities, factor-price equalization, and the pattern of specialization. Among the new results which are proved, it is shown that, as more and more factor-price rigidities are imposed on an economy, it comes "closer" to a state of factor-price equalization.
125 citations
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TL;DR: In this article, the authors explore the likely effects of trade liberalisation on the prices of goods and services, taking into account the distribution sector and the dynamic issues of volatility, long-term economic growth, and short-term adjustment stresses.
Abstract: This paper asks whether a developing country's own trade liberalisation could translate into increased poverty, and what information would be required to identify whether it will do so. It plots the channels through which such effects might operate, identifying the static effects via four broad groups of institutions – households, distribution channels, factor markets and government – and the dynamic issues of volatility, long–term economic growth, and short–term adjustment stresses. An increase in the price of something a household sells (labour, good, service) increases its welfare. Thus, the paper first explores the likely effects of trade liberalisation on the prices of goods and services, taking into account the distribution sector. Also critical is whether trade reform creates or destroys markets. Trade reform is also likely to affects factor prices – of which the wages of the unskilled is the most important for poverty purposes. If reform boosts the demand for labour–intensive products, it boosts the demand for labour and wages and/or employment will increase. However, not all developing countries are relatively abundant in unskilled labour and trade can boost demand for semi–skilled rather than unskilled, labour. Hence poverty alleviation is not guaranteed. Trade reform can affect tariff revenue, but much less frequently and adversely than is popularly imagined. Even if it does, it is a political decision, not a law of nature, that the poor should suffer the resulting new taxes or cuts in government expenditure. Opening up the economy can reduce risk and variability because world markets are usually more stable than domestic ones. But sometimes it will increase them because stabilisation schemes are undermined or because residents switch to riskier activities. The non–poor can generally tide themselves over adjustment shocks from a liberalisation, so public policy should focus on whether the initially poor and near temporary, setbacks. The key to sustained poverty alleviation is economic growth. There is little reason to fear that growth will not boost the incomes of the poor. Similarly, while the argument that openness stimulates long–run growth has still not been completely proven, there is every presumption that it will.
125 citations
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TL;DR: In this paper, the authors review recent evidence on price rigidity from the macroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling, and discuss empirical evidence on these and other important features of micro price adjustment and ask how they affect the...
Abstract: We review recent evidence on price rigidity from the macroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for the large effects of demand shocks on output and, in particular, the effects of monetary policy on output. A recent influx of data on individual prices has greatly deepened macroeconomists’ understanding of individual price dynamics. However, the analysis of these new data raises a host of new empirical issues that have not traditionally been confronted by parsimonious macroeconomic models of price setting. Simple statistics such as the frequency of price change may be misleading guides to the flexibility of the aggregate price level in a setting in which temporary sales, product churning, cross-sectional heterogeneity, and large idiosyncratic price movements play an important role. We discuss empirical evidence on these and other important features of micro price adjustment and ask how they affect the ...
125 citations
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TL;DR: In this paper, the authors investigated the behavior of consumer prices in Italy by looking at micro data in the attempt to obtain a quantitative measure of the unconditional degree of price rigidity in the Italian economy.
Abstract: This paper investigates the behaviour of consumer prices in Italy by looking at micro data in the attempt to obtain a quantitative measure of the unconditional degree of price rigidity in the Italian economy. The analysis focuses on the monthly frequency of price changes and on the duration of price spells, also with reference to different types of products and outlets. Prices tend to remain unchanged on average for around 10 months; duration is longer for nonenergy industrial goods and services and much shorter for energy products. Price changes are more frequent upward than downward, in larger stores than in traditional ones. When the geographical location of outlets is accounted for, price changes display considerable synchronisation, in particular in the service sector.
124 citations
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TL;DR: In most situations of practical relevance, the price behavior of a call option is very similar to a combined position involving the underlying stock and borrowing as discussed by the authors, and the call price and the stock price will change in the same direction.
Abstract: In most situations of practical relevance, the price behavior of a call option is very similar to a combined position involving the underlying stock and borrowing. The call price and the stock price will change in the same direction. The effect on the call price of a one dollar change in the stock price, however, will depend on the current price of the stock; the number of shares of stock in the replicating portfolio must equal the slope of the call price curve at that price. When the call is deep out of the money—i.e., when the stock price is much lower than the striking price—a one dollar change in the stock price has little effect on the call price. When the stock price is equal to the striking price, a one dollar change in the stock price produces roughly a half-dollar change in the call price. If the stock price rises until the call is deep in the money, a one dollar move in the stock price results in nearly a one dollar move in the call price. Because the call price behaves this way, we must revise ...
124 citations