Tradability and Goods’ Prices: A Tale of Two Regions.

In this Academic Research seminar, Joseba Martinez, Assistant Professor of Economics at London Business School and a CEPR Research Affiliate will discuss his paper “Tradability and Goods’ Prices: A Tale of Two Regions.”

Paper Abstract

We provide new evidence on manufacturing price inflation and the allocation of productivity gains by comparing US and EU industries from 1992 to 2017. Two patterns emerge. In tradable industries, where global competition is strong, prices have moved in lockstep across the Atlantic. In non-tradable industries, relatively sheltered from foreign competition, value added deflators in the US have risen about four times faster than in Europe despite similar wages and industry compositions. The inflation differential is unrelated to compositional shifts, and evident in narrowly defined product categories where unobserved quality differences are unlikely to matter. A decomposition attributes one-third of the differential to rising market power and two-thirds to slower productivity growth in US non-tradable manufacturing industries, a pattern absent in tradable ones. Using variation in import penetration, we find that greater trade exposure lowers prices and profit shares, while competition policy remains crucial in non-tradable industries.

Speaker Bio

Joseba Martinez is an Assistant Professor of Economics at London Business School and a CEPR Research Affiliate. His research studies how technology shapes productivity, growth, and the response of the economy to policy, and how information asymmetry in financial markets affects investment and growth. Recent work examines the cost of the green energy transition when fossil-fuel-dependent capital cannot be easily repurposed, the financial-market valuation of firms exposed to that transition, the role of government-funded innovation in sustaining postwar U.S. growth, the macroeconomic effects of fiscal policy, and the labour-market consequences of automation and AI. He has also developed natural-language methods on patent data to measure technical change and link it to aggregate productivity. His published research, in Review of Economic Studies, Journal of International Economics, AEJ: Macroeconomics, examines the design of bank stress tests, capital-market integration in monetary unions, and the role of technology diffusion and R&D in shaping business cycle dynamics. He teaches Macroeconomics to MBA and EMBA students and PhD Macroeconomics to doctoral candidates at London Business School. Beyond his academic role, he has consulted for a New York-based investment fund and served as a visiting scholar at the International Monetary Fund. Dr Martinez brings substantial professional experience to his academic work. Before beginning his PhD, he worked as a trader at ABN AMRO London and held the position of senior manager at the European Bank for Reconstruction and Development, where he developed expertise in financial markets that informs his current research and teaching.

The speaker will be virtual but you may join us in-person for a viewing in the Perkins Room (R-429). Whether attending in person or virtually, please register in advance.

The Growth Lab’s Research Seminar series is a weekly seminar that brings together researchers from across the academic spectrum who share an interest in growth and development.