Fernando Martins

What Survey Data Reveal About Price and Wage Rigidity in Portugal

This paper exploits the information collected from a survey conducted on a sample of Portuguese firms to study the patterns of firms’ price and wage adjustments and the extent of nominal price and wage rigidities. The evidence shows that the frequency of price changes varies substantially across sectors and depends on the intensity of competition, the share of labor costs and firms’ price reviewing behavior. The results also suggest that the constraint imposed by the presence of downward nominal wage rigidity is less important in firms where the fraction of permanent and high-skilled workers is lower and the share of flexible pay components is higher.

Choosing between Time and State Dependence: Micro Evidence on Firms' Price‐Reviewing Strategies

Thanks to recent findings based on survey data, it is now well known that firms differ from each other with respect to their price-reviewing strategies. While some firms review their prices at fixed intervals of time, others prefer to perform price revisions in response to changes in economic conditions. In order to explain this fact, some theories have been suggested in the literature. However, empirical evidence on the relative importance of the factors determining firms different strategies is virtually nonexistent. This paper contributes to filling this gap by investigating the factors that explain why firms follow time-, state- or time- and state-dependent price-reviewing rules. We find that firms strategies vary with firm characteristics that have a bearing on the importance of information costs, the variability of the optimal price and the sensitivity of profits to non-optimal prices. Menu costs, however, do not seem to play a significant role.