Factor Intensity and Price Rigidity:
Evidence and Theory

Ekaterina V. Peneva*

Federal Reserve Board of Governors

December 10, 2008

Figure 1. Average Monthly Frequency of Price Change and Labor Share for 29 SIC Sectors

	Weighted Average Monthly Frequency of Price Changes, 1995-1997	Average Share of Labor Inputs in Total Output, 1958-1996
1 Agriculture	37.92	0.26
7 Food and kindred products	31.53	0.16
8 Tobacco	21.25	0.15
9 Textile mill products	14.97	0.23
10 Apparel	33.47	0.33
11 Lumber and wood	21.6	0.25
12 Furniture and fixtures	23.01	0.36
13 Paper and allied	17.64	0.26
14 Printing, publishing and allied	8.28	0.4
15 Chemicals	15.05	0.24
16 Petroleum and coal products	72.18	0.09
17 Rubber and misc. plastics	29.91	0.32
18 Leather	25.85	0.33
19 Stone, clay, glass	15.93	0.37
21 Fabricated metal	12.38	0.35
22 Machinery, non-electrical	29.72	0.36
23 Electrical machinery	26.26	0.35
24 Motor vehicles	37.12	0.19
25 Transportation equipment & ordnance	18.96	0.43
26 Instruments	10.85	0.46
27 Misc. manufacturing	17.38	0.33
28 Transportation	27.96	0.41
29 Communications	13.37	0.32
30 Electric utilities	43.4	0.21
31 Gas utilities	64.2	0.11
32 Trade	8.86	0.5
33 Finance Insurance and Real Estate	17.21	0.28
34 Services	14.97	0.43
35 Government enterprises	3.79	0.38

Return to Figure 1

Figure 5. The first derivative of the profit gain with respect to labor intensity ploted for different values of mu and alpha.

mu	alpha: 0.01	alpha: 0.035	alpha: 0.06	alpha: 0.085	alpha: 0.11	alpha: 0.135	alpha: 0.16	alpha: 0.185	alpha: 0.21	alpha: 0.235	alpha: 0.26	alpha: 0.285	alpha: 0.31	alpha: 0.335	alpha: 0.36	alpha: 0.385	alpha: 0.41	alpha: 0.435	alpha: 0.46	alpha: 0.485
0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01
0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035	0.035
0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06	0.06
0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085	0.085
0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11	0.11
0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135	0.135
0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16
0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185	0.185
0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21	0.21
0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235	0.235
0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26	0.26
0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285	0.285
0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.31
0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335	0.335
0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36	0.36
0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385	0.385
0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41	0.41
0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435	0.435
0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46
0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485	0.485
0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51
0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535	0.535
0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56	0.56
0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585	0.585
0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61	0.61
0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635	0.635
0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66	0.66
0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685	0.685
0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71	0.71
0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735	0.735
0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76
0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785	0.785
0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81	0.81
0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835	0.835
0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86	0.86
0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885	0.885
0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91	0.91
0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935	0.935
0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96	0.96
0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985	0.985

Return to Figure 5

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Factor Intensity and Price Rigidity: Evidence and Theory

Factor Intensity and Price Rigidity:
Evidence and Theory