Incomplete cost pass-through under deep habits

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 cost shocks are not fully passed through to product prices. That is, in response to a firm-specific increase in marginal costs, prices rise, but by less than marginal costs leading to a decline in the firm-specific markup of prices over marginal costs. Pass-through is predicted to be even lower when shocks to marginal costs are anticipated by firms. In our model, unanticipated firm-specific cost shocks lead to incomplete pass-through (or a decline in markups) of about 20 percent and anticipated cost shocks are associated with incomplete pass-through of about 50 percent. The model predicts that cost pass-through is increasing in the persistence of marginal cost shocks and U-shaped in the strength of habits. The relative-deep-habits model implies that conditional on marginal cost disturbances, prices are less volatile than marginal costs

The macroeconomics of subsistence points

This paper explores the macroeconomic consequences of preferences displaying a subsistence point. It departs from the existing related literature by assuming that subsistence points are specific to each variety of goods rather than to the composite consumption good. We show that this simple feature makes the price elasticity of demand for individual goods procyclical. As a result, markups behave countercyclically in equilibrium. This implication is in line with the available empirical evidence

Characteristics of Floors for Pig Pens: Friction, Shock Absorption, Ammonia Emission and Heat Conduction

In respect to improving animal welfare and to minimize the ammonia emission from animal facili-ties, it is important to have appropriate information on the impact of the flooring system in pig pens. Twelve different floors, six commercially available and six experimental floors for pig pens, were investigated in respect to four different characteristics: friction coefficients, shock absorption, am-monia emission and heat conduction. The friction coefficients were measured as dynamic friction for dry floors and floors wetted with water and rapeseed oil and as static friction for dry floors. The floor elasticity was measured as shock absorption when letting a weight fall on the test floors. The ammonia emission was measured in a wind tunnel with ammonia water wetted test floors. Heat conduction was measured by a heated body placed on the test floors. The results showed that the friction coefficient for slatted floors of plastic and cast iron was lower than for concrete and also lower than recommended in literature in respect to animal welfare. The ability to absorb shocks was better for slatted floors of plastic and cast iron than for concrete slatted floors. The ammonia emission was higher from slatted floors of concrete than from slatted floors of plastic and cast iron. Finally, the heat conduction for concrete slatted floors was higher compared to slatted floors of plastic and cast iron. In conclusion, concrete slats were ideal for the animals in respect to the risk of slipping, but less than ideal in respect to elasticity and ammonia emission, furthermore they were cold for the animals. Plastic and cast iron slats were too slippery, but better for the environ-ment in respect to ammonia emission, moreover they were warmer for the pigs to lie on