EVALUATING MICROFOUNDATIONSFOR AGGREGATE PRICE RIGIDITIES EVIDENCE FROM MATCHED FIRM-LEVEL DATA ON PRODUCT PRICES AND UNIT LABOR COST

Using data on product-level prices matched to the producing …rm’s unit labor cost, wereject the hypothesis of a full and immediate pass-through of marginal cost. Since wefocus on idiosyncratic variation, this does not …t the predictions of the Ma´ckowiak andWiederholt (2009) version of the Rational Inattention Model. Neither do we …nd that…rms react strongly to predictable marginal cost changes, as expected from the Mankiwand Reis (2002) Sticky Information Model. We …nd that...