Recent literature has addressed how product creation amplifies economic fluctuations via the love of variety. Yet, empirical evidence on variety effects is sparse. The current paper demonstrates that decreasing returns in variety-level production technology, which leads to increasing marginal costs, similarly amplify business cycles. Product scope expansions reduce costs and firms have an incen...

A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal cost shocks are not fully passed through to product prices. That is, in response to a firm-specific inc...

according to the recent literature, the expansion of intra-industry trade increases the intra-industrial excess job reallocation. based on lovely and nelson (2002), this study examined the hypothesis that marginal intra-industry trade has a positive effect on the excess job reallocation in iranian industries. therefore, we have employed a panel technique for iranian manufacturing industries at ...