Non-price Competition, Real Rigidities and Inflation Dynamics

In the last decade, the analytical progress achieved in the New Keynesian literature has been remarkable. Many of the early assumptions have been relaxed, leading to medium-scale macroeconomic models that are now able to capture many features of real-world data. Nevertheless, modern-day New Keynesian models still assume, as did their early counterparts, that firms compete in the market with no tools other than their relative prices. In particular, this literature has so far neglected the consequences of extending competition between firms to the non-price dimension. This paper tries to fill this gap by enriching the canonical New Keynesian framework to include both price and non-price competition. This has important consequences for the analysis of inflation dynamics, modifying in particular the inflation-marginal cost relationship. As a general result, we show that any activity by firms that boosts demand for their products, without directly affecting their prices, dampens the overall degree of real rigidities in price-setting.Non-price competition, inflation dynamics, real rigidity

Advertising, Labor Supply and the Aggregate Economy. A long run Analysis

This paper studies the influence of persuasive advertising in a neoclassical growth model with monopolistically competitive firms. Our findings show that advertising can significantly affect the stationary equilibrium of a model economy in which the labor supply is endogenous. In this case, for empirically plausible calibrations, we find that the equilibrium level of hours worked, GDP, and consumption increase with the amount of resources invested in advertising. These findings are consistent with a new stylized fact provided in this paper: over the past decade, per-capita advertising expenditures have been positively correlated with per-capita output, consumption and hours worked across OECD countries. Because of the connection between advertising and labor supply, we show that our model improves on its neoclassical counterpart in explaining both within-country and cross-country variability of hours worked per capita.Advertising, Labor Wedge, Labor supply, Economic Growth, Hours Worked.

Advertising and Business Cycle Fluctuations

This paper provides new empirical evidence for quarterly U.S. aggregate advertisingexpenditures, showing that advertising has a well defined pattern over the BusinessCycle. To understand this pattern we develop a general equilibrium model wheretargeted advertising increases the marginal utility of the advertised good. Advertisingintensity is endogenously determined by profit maximizing firms. We embed thisassumption into an otherwise standard model of the business cycle withmonopolistic competition. We find that advertising affects the aggregate dynamics ina relevant way, and it exacerbates the welfare costs of fluctuations for the consumer.Finally, we provide estimates of our setup using Bayesian techniques.Advertising, DSGE model, Business Cycle fluctuations, Bayesian

The last fifteen years of stagnation in Italy: A Business Cycle Accounting Perspective

In this paper, we investigate possible sources of declining economic growth performance in Italy starting around the middle of the ’90s. A long-run data analysis suggests that the poor performance of the Italian economy cannot be ascribed to an unfortunate business cycle contingency. The rest of the euro area countries have shown better performance, and the macroeconomic data show that the Italian economy has not grown as rapidly as these other European economies. We investigate the sources of economic fluctuations in Italy by applying the Business Cycle Accounting procedure introduced by Chari, Kehoe and McGrattan (2007). We analyze the relative importance of efficiency, labor, investment and government wedges for business cycles in Italy over the 1982-2008 period. We find that different wedges have played different roles during the period, but the efficiency wedge is revealed to be the main factor responsible for the stagnation phase beginning around 1995. Our findings also show that the improvement in labor market distortions that occurred in Italy during the ’90s provided an alleviating effect, preventing an even stronger slowdown in per capita output growth

Relative Concerns on Visible Consumption: A Source of Economic Distortions

Do relative concerns on visible consumption give rise to economic distortions? We re-examine the question posited by Arrow and Dasgupta (2009) building upon their general framework but recognizing that relative concerns can only apply to visible goods (e.g., cars, clothing, jewelry) and that households consume both visible and non-visible goods. Contrary to Arrow and Dasgupta (2009), the answer to this question turns to be always affirmative: the competitive equilibrium will always be different than the socially optimal one, since individuals do not take into account the negative externality they exert on others through the consumption of the visible good, while the social planner does. If one invokes separability assumptions, then the steady state competitive equilibrium consumption of non-visible goods will be strictly lower than the socially optimal one.Financial support from the Spanish Ministry of Science and Innovation (ECO2011-29751 and ECO2012-36719) is gratefully acknowledged

Size, Trend, and Policy Implications of the Underground Economy

We study the underground economy in a dynamic and stochastic general equilibrium framework. Our model combines limited tax enforcement with an otherwise standard two-sector neoclassical stochastic growth model. The Bayesian estimation of the model based on Italian data provides evidence in favor of an important underground sector in Italy, with a size that has steadily increased over the whole sample period. We show that this pattern is due to a persistent increase in taxation. Fiscal policy experiments suggest that a moderate tax cut, along with a stronger effort in the monitoring process, causes a sensitive reduction in the size of the underground economy and positive stimulus to the regular sector that jointly increase the total fiscal revenues

Size, trend, and policy implications of the underground economy

We study the underground economy within a dynamic and stochastic general equilibrium framework. Our model combines limited tax enforcement with an otherwise standard two-sector neoclassical stochastic growth model. The Bayesian estimation of the model based on Italian data provides evidence in favor of an important underground sector in Italy, with a size that has increased steadily over the whole sample period. We show that this pattern is due to a steady increase in taxation. Fiscal policy experiments suggest that a moderate tax cut, along with a stronger effort in the monitoring process, causes a sizeable reduction in the size of the underground economy and provides a positive stimulus for the regular economy. Both of these effects jointly increase total fiscal revenues.Francesco Turino is grateful for the financial support provided by the Spanish Ministerio de Educación y Ciencia and FEDER funds (project SEJ-2007-62656/ECON)

Advertising and Aggregate Consumption: A Bayesian DSGE Assessment

Aggregate data reveal that in the US, advertising absorbs 2% of GDP. Because the purpose of brand advertising is to foster sales, we ask whether such spending appreciably affects aggregate consumption and economic activity. This question is addressed by developing and estimating a dynamic general equilibrium model in which households’ preferences for differentiated goods depend on brand advertising. Estimated results for the US economy indicate that in the long‐run, the presence of advertising raises aggregate consumption, investment, and hours worked, eventually fostering overall economic activity. We also find that advertising has a relevant impact on fluctuations in consumption and investment.Molinari acknowledges financial support from the Spanish Ministry of Science and Technology (Grants SEJ1512 and ECO2013‐43526‐R). Turino acknowledges financial support from MINECO/FEDER (ECO2015‐70540‐P)

Percepción del profesorado y alumnado sobre la docencia en inglés: Aplicación AICLE en la UA

En las últimas décadas la implementación del Aprendizaje Integrado de Contenido y Lenguas Extranjeras (AICLE) y del Inglés como Medio de Instrucción (EMI) ha sido un tema de continuo debate en el sistema universitario español, destacando la ausencia de estrategas políticas a nivel nacional. En este contexto, los centros de educación superior han desarrollado programas de planificación y fomento del AICLE para mejorar su competitividad y atraer alumnado. Este trabajo analiza las motivaciones y actitudes del profesorado y del alumnado respecto a la docencia de grado en inglés. Utilizando cuatro cuestionarios semiestructurados se ha recogido información sobre profesores y estudiantes en seis asignaturas obligatorias del grado en la Universidad de Alicante. El análisis comparativo entre los grupos con docencia en inglés y en castellano sugiere que existen diferencias en el perfil de docente y de alumno, así como en las motivaciones de ambos agentes hacia la enseñanza en inglés. Las diferencias en dichos factores y la medición de la orientación hacia metas (escala FLAGS 1) y las actitudes hacia el estudio de inglés (escala FLAGS 2) de los estudiantes permiten mejorar el diseño y la implementación de los programas bilingües por parte de los gestores de las instituciones universitarias

Multi-product Firms and Business Cycle Dynamics

Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for a significant share of aggregate output. In the present paper, and consistent with this evidence, we relax the standard assumption of mono-product firms that is typically made in dynamic general equilibrium (DSGE) models. We develop a DSGE model with multi-product firms and endogenous markups to assess the implica- tions of the intra-firm extensive margin on business cycle fluctuations. In this environment, the procyclicality of product creation emerges as a consequence of firms’ strategic interactions. Due to the proliferation effect in- duced by firm-level adjustments in product scope, we show that our model embodies a quantitatively important magnification mechanism of aggregate shocks