The Persistence of Price, Volume, Cost and Productivity Effects: Industry-Level Analysis

Abstract

We investigate the persistence of year-over-year changes in the components of operating profit. Using industry-level data, we find that changes in the volume of output exhibit a more persistent effect on profitability than changes in output prices, labor cost, labor productivity, intermediate input cost, and intermediate input productivity. Furthermore, we show that industry growth is the main driver of persistence. Industry concentration and barriers to entry, price stickiness, and cost stickiness also affect the degree of persistence. One implication of these results is that the documented higher persistence of revenue shocks, as compared to expense shocks, is likely due to the volume effect rather than the price effect of revenue.

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Cite this paper

@inproceedings{Badia2015ThePO, title={The Persistence of Price, Volume, Cost and Productivity Effects: Industry-Level Analysis}, author={Marc Badia and Nahum D. Melumad and Michael L. Alles and Eli Amir and Moshe Bareket and Orie E. Barron and Francesco Bova and Ulf Bruggeman and Donal Byard and Colin Clubb and Shira Cohen and Patricia M. Dechow and Valentin Dimitrov and Miguel Duro and Juan M. Garcia-Lara and Dan Givoly and Bjorn N. Jorgensen and Andy Leone and Natalie Mizik and Marc Morris and Yuki Sakasai and Jayanthi Sunder and Jake Thomas and Linda Vincent}, year={2015} }