Browsing by Author "Turen, Javier"

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    Belief-dependent pricing decisions
    (2024) Frache, Serafin; Lluberas, Rodrigo; Turen, Javier
    How do inflation and idiosyncratic cost expectations affect firms' price-adjusting decisions? Evidence on micro price adjustment has emphasized that price changes follow a fixed adjustment schedule, i.e., time-dependent pricing, or that they respond to the state of the economy, i.e., state-dependent pricing. We use firm expectation survey data to argue that price-adjustment decisions are also belief-dependent. While controlling for time- and state-dependent factors, we find that for the decision to adjust prices, inflation expectations do not play any role, but firms' beliefs about their overall costs do. This highlights a robust correlation between idiosyncratic expectations and economic decisions. We show that the expectation channel is heterogeneous across firms and operates with a delay. When studying firms' expected magnitude of price changes, the relevance of current inflation expectations is recovered apart from costs. Our findings provide empirical support for the belief-driven nature of pricing decisions and their economic implications.
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    Covid-19 contagion, economic activity and business reopening protocols
    (2021) Janiak, Alexandre; Machado, Caio; Turen, Javier
    This paper studies the impact of sanitary protocols aimed at reducing the contagion by Covid-19 during the production and consumption of goods and services. We augment a heterogeneous SIR model with a two-way feedback between contagion and economic activity, allowing for firm and sector heterogeneity. While protocols are a burden for firms (especially SMEs), they may enhance economic activity by avoiding infections that reduce the labor supply. Using Chilean data, we calibrate the model and assess the impact of recommended firm protocols on contagion and economic activity in the after-lockdown period. Our quantitative results suggest that: (i) A second wave of infections is likely in the absence of protocols; (ii) Protocols targeted at some sectors can reduce deaths while at the same time improving economic conditions; (iii) Protocols applied widely have a negative effect on the economy. We also find that applying strict protocols to a few sectors is generally preferable to applying milder protocols to a larger number of sectors, both in terms of health and economic benefits. (c) 2020 Elsevier B.V. All rights reserved.
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    State-Dependent Attention and Pricing Decisions
    (2023) Turen, Javier
    This paper studies price-setting decisions under rational inatten-tion. Prices are set by tracking an unobserved target whose distri-bution is also unknown. Information acquisition is dynamic and fully flexible since, given information acquired previously, price setters choose the amount of information they collect as well as how they want to learn about both the outcome and its distribu-tion. We show that by allowing for imperfect information to be the unique source of rigidity, the model can reconcile stylized facts in the microeconomic evidence on price setting while simultaneously being consistent with empirical results on state-dependent attention. (JEL D21, D82, D83, E32, L11, L25)
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    Subsidizing startups under imperfect information
    (2023) Melcangi, Davide; Turen, Javier
    How is firm creation affected by imperfect information? Our model of rational inattention generates inefficient entry and labor misallocation, because startups make error-prone decisions. Learning decisions of prospective entrepreneurs alter the effects of lump-sum transfers to startups: the total employment gain is amplified due to an unintended increase in inefficient entry, most entrants hire fewer workers, and misallocation goes up. The transfer changes the learning incentives and makes even productive startups lean towards more conservative hiring. We show that this novel information channel works against well-known mechanisms, and thus can help reconcile recent empirical evidence on startup policies.(c) 2023 Published by Elsevier B.V.