PRICE, MARGINAL COST AND THE BUSINESS CYCLE

We estimate mark-ups of price over marginal cost for UK manufacturing, based on the approach of Hall (1988). We also extend his method to allow for varying mark-ups over industries and the cycle. Using data on 16 two-digit industries, 1968-89, we find: (1) the average mark-up in UK manufacturing is...

Full description

Saved in:
Bibliographic Details
Published in:Oxford bulletin of economics and statistics 1995-02, Vol.57 (1), p.25-39
Main Authors: Haskel, Jonathan, Martin, Christopher, Small, Ian
Format: Article
Language:English
Subjects:
Business cycles
Economic models
Industry
Manufacturers
Manufacturing
Marginal costs
Market structure
Price increases
Pricing
Studies
United Kingdom
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We estimate mark-ups of price over marginal cost for UK manufacturing, based on the approach of Hall (1988). We also extend his method to allow for varying mark-ups over industries and the cycle. Using data on 16 two-digit industries, 1968-89, we find: (1) the average mark-up in UK manufacturing is 2.00, (2) mark-ups are procyclical, (3) mark-ups are higher in more concentrated industries. Finding (2) is evidence against the macroeconomic theory that the transmission of demand shocks to employment works via counter-cyclical mark-ups. Finding (3) suggest a significant relation between mark-ups and market structure that has proved elusive in industrial economics studies that use profit rates to measure mark-ups. Copyright 1995 by Blackwell Publishing Ltd
ISSN:0305-9049
1468-0084
DOI:10.1111/j.1468-0084.1995.tb00025.x