TY  - JOUR
AU  - Rotemberg,Julio J.
AU  - Woodford,Michael
TI  - Imperfect Competition and the Effects of Energy Price Increases on Economic Activity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5634
PY  - 1996
Y2  - June 1996
UR  - http://www.nber.org/papers/w5634
L1  - http://www.nber.org/papers/w5634.pdf
N1  - Author contact info:
Julio J. Rotemberg
Graduate School of Business
Harvard University, Morgan Hall
Soldiers Field
Boston, MA  02163
Tel: 617/495-1015
Fax: 617/496-5994
E-Mail: jrotemberg@hbs.edu

Michael Woodford
Department of Economics
Columbia University
420 W. 118th Street
New York, NY 10027
Tel: 212/854-1094
Fax: 212-854-8059
E-Mail: mw2230@columbia.edu
AB  - We show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil.  Plausibly parameterized models of this type are able to mimic the response of output and real wages in the United States.  The responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output.
ER  -