Massimiliano Tancioni

Innovations, wages and profits

This paper investigates the dynamics of wages and profits and the influence innovation strategies have on them. The relationships between innovation, productivity, and distribution are modeled and estimated by employing panel data techniques. Two European innovation surveys (1994-96 and 1998-2000) are used with data at both the country and industry levels. Innovation is found to have positive effects on income dynamics beyond the role it has on productivity gains; it may weaken the distribution constraint posed by the competition between profits and wages. Profits are driven by both the Schumpeterian effects of new products and the diffusion effects of new technologies and production processes. Wages tend to grow faster in sectors where innovation expenditure is higher, but the factors affecting wages are different for high- and low-innovation sectors, suggesting that two contrasting models of technological and price competitiveness have important distributional implications.

Monetary policy, rule-of-thumb consumers and external habits: A G7 comparison

This article extends the standard New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model to agents who cannot smooth consumption (i.e. spenders) and are affected by external consumption habits. Although these assumptions are not new, their joint consideration strongly affects some theoretical and empirical results addressed by the recent literature. By deriving closed-form solutions, we identify different demand regimes and show that they are characterized by specific features regarding dynamic stability and monetary policy effectiveness. We also evaluate our model by stochastic simulations obtained from the Bayesian parameters estimates for the Group of Seven (G7) economies. From posterior impulse responses, we address the empirical relevance of the different regimes and provide comparative evidence on the heterogeneity of monetary policy effects among countries.

A macroeconometric model for the analysis of the impact of technological change and trade on employment

This paper introduces the theoretical foundations and the structure of a macroeconometric model for the analysis of compensation schemes. After a brief explanation of the main relationships between technical change and employment, the general structure of the model is outlined with reference to the objective of the analysis. The formal model illustrates a possible way of approaching, from a macroeconomic perspective, the analysis of the complex relations between technological change, trade, growth and employment dynamics. The aim is to highlight the relevance of some aspects that in the past have only received a minor treatment in mainstream contributions to the issue. In particular, the strong dependence of the results on distribution and demand is recognized. The model proposed is the extended version of a macroeconomic model previously presented by Vivarelli (1995). Modifications have both theoretical and technical relevance. Some results from an application to Italy and the United Kingdom follow a brief discussion on the techniques adopted for the econometric estimation.

Disentangling Factors behind Training Participation in Italy

This paper analyses the pattern of training participation in Italy. Employing a new survey conducted on a large sample of individuals, we develop a model of bilateral training choices. In order to distinguish between workers and employers choices, we estimate a structural bivariate probit model whose identification relies on some mild assumptions on sample selection. With this approach we attempt to overcome the informative limitations of training participation probability estimates referred to reduced form models. The training participation probability depends on individual, job-specific and firm’s characteristics. Among the most relevant results, we find that females demand as much training as males and suffer from poorer chances of firm-provided training. Similarly, employees with a temporary contract are rationed even if their demand is in line with that of their permanent colleagues. Conversely, the lower participation of parttimers is explained by lower demand. A stance for more targeted training public policies is derived.

Contractionary Effects of Supply Shocks: Evidence and Theoretical Interpretation

The debate on the response of hours worked after productivity improvements is still an open issue in the theoretical and empirical literature. In this work we show that, once conditional correlations are taken into account, both hours and investment decline temporarily following a positive technology shock. We fiÂ…rst provide evidence about this apparent puzzle employing weakly identiÂ…ed SVECs. We then set-up and estimate a sticky price/wage DSGE model in which the presence of strategic complementarities in pricesetting lowers the slope of the New Keynesian Phillips curve, and show that the posterior impulse responses are consistent with the SVEC-based evidence.

Monetary Policy under Rule-of-Thumb Consumers and External Habits: An International Empirical Comparison

This paper develops a simple New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model with rule-of-thumb consumers and external habits. Our theoretical model has a closed-form solution which allows the analytical derivation of its dynamical and stability properties. These properties are analyzed and discussed in the light of their implications for the efficacy and the calibration of the conduct of the monetary policy. The model is then evaluated empirically, employing numerical simulations based on Monte Carlo Bayesian estimates of the structural parameters and impulse response analyses based on weakly identified SVECMs. The estimates are repeated for each of the G7 national economies. Providing single country estimates and simulations, we derive some indications on the relative efficacy of monetary policy and of its potential asymmetric effects resulting from the heterogeneity of the estimated models.

Firm-specific capital, productivity shocks and investment dynamics

The theoretical literature on business cycles predicts a positive investment response to productivity improvements. In this work we question this prediction from theoretical and empirical standpoints. We first show that a negative short-term response of investment to a positive technology shock is consistent with a plausibly parameterized new Keynesian DSGE model in which capital is firm-specific and monetary policy is not fully accommodative. Employing Bayesian techniques, we then provide evidence that permanent productivity improvements have short-term contractionary effects on investment. Even if this result emerges in both the firm-specific and rental capital specifications, only with the former the estimated average price duration is in line with microeconometric evidence. In the firm-specific capital model, strategic complementarity in price setting leads to a degree of price inertia which is higher than that implied by the frequency at which firms change their prices.

Contractionary Technology Shocks

This paper adds to the large body of literature on the effects of technology shocks empirically and theoretically. Using a structural vector error correction model, we first provide evidence that not only hours but also investment decline temporarily following a technology improvement. This result is robust to important data and identification issues addressed in the literature. We then show that the negative response of inputs is consistent with an estimated monetary model in which the presence of strategic complementarity in price setting, in addition to nominal rigidities, lowers the sensitivity of prices to marginal costs, and monetary policy does not fully accommodate the shock.

Sovereign Debt, Default Risk and Fiscal Consolidation in the EZ Periphery

Non zero sovereign and private sector default probabilities are introduced in a monetary open economy model considering a monopolistically competitive financial sector. This modification allows to empirically evaluate whether the emergence of a financial wedge in the form of a sovereign risk channel can reduce the size or even reverse the sign of the Keynesian fiscal multiplier, conditional to alternative fiscal consolidation measures. The model is estimated using data of EZ peripheral countries (Greece, Ireland, Italy, Portugal and Spain). From posterior simulations we show that i) the unconditional relation between sovereign risk and macroeconomic fundamentals is weak; ii) fiscal contractions are self-defeating, such that the sovereign risk channel amplifies the Keynesian effects of the fiscal contraction; iii) the consideration of a liquidity trap environment does not reverse these results.

Price-Setting, Monetary Policy and the Contractionary Effects of Productivity Improvements

This paper adds to the large literature on the e¤ects of technology shocks empirically and theoretically. Using a SVEC model, we rst show that not only hours but also investment decline temporarily following a technology improvement. This result is robust with respect to important data and identi cation issues addressed in the literature. We then show that the negative response of inputs is consistent with an estimated monetary DSGE model in which the presence of strategic complementarity in price setting, in addition to nominal rigidities, lowers the sensitivity of prices to marginal costs, and monetary policy does not fully accommodate the shock.