Domenico J. Marchetti

Energy consumption, survey data and the prediction of industrial production in Italy: a comparison and combination of different models

We investigate the prediction of Italian industrial production. We first specify a model based on electricity consumption; we show that the cubic trend in such a model mostly captures the evolution over time of the electricity coefficient, which can be well approximated by a smooth transition model a la Terasvirta, with no gains in predictive power, though. We also analyze the performance of models based on data of different business surveys.

Interpreting the procyclical productivity of manufacturing sectors: can we really rule out external effects?

Recent empirical contributions on procyclical productivity have focused on the dynamic implications of persistent aggregate fluctuations on sectoral productivity. Given a permanent innovation in aggregate output, unobserved variations of labour (or capital) utilization may have only a transitory effect on measured productivity, whereas external effects should produce permanent effects. It is found that persistent aggregate fluctuations have a permanent effect on productivity of four-digit US manufacturing industries. While a number of alternative explanations of this evidence are discussed and ruled out, the findings are consistent with a simple model with external or thick market effects.

Effort and Hours over the Business Cycle

Despite the importance of work effort very little is known about its cyclical behavior. While models with labor hoarding predict a pro-cyclical effort, other models reach an opposite conclusion and recent contributions emphasize the increase of workers’ effort in the US economy during the Great recession. By using high-quality, firm-level data, we obtain an estimate of change in labor effort from a dynamic cost minimization set-up and provide some evidence that the relationship between effort and hours can be non monotonic. We find that, below a certain number of hours per employee, the marginal hour is worked with an increasing hourly effort. During expansions, however, if a critical level of hours per employee is reached, then every additional hour is worked with decreasing effort, arguably due to physical and mental fatigue from long hours.