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The Determination of Profit Margins in UK Manufacturing

Author

Listed:
  • Conyon, M
  • Machin, Stephen

Abstract

This paper examines the determinants of profit margins in 91 U.K. manufacturing industries over the period 1983-86. It considers how the inclusion of labor market characteristics in empirical Industrial Organization specifications affects the estimated concentration-margins relationship. The empirical work pays detailed attention to the endogenous nature of variables derived from structural Industrial Organization models. The authors report instrumental variables estimates of margins equations in which there emerges a significant role for labor market characteristics. Indeed, both unionization and industrywide unemployment are found to depress profit margins. The impact of concentration is seen to be biased downward when these variables are omitted. Copyright 1991 by Blackwell Publishing Ltd.

Suggested Citation

  • Conyon, M & Machin, Stephen, 1991. "The Determination of Profit Margins in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 569-582, June.
    • Handle: RePEc:bla:jindec:v:39:y:1991:i:4:p:569-82
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    Cited by:

    1. Jacques Bughin & Stefano Vannini, 2003. "Unions and the Welfare Impact of Foreign Direct Investment — A Wisdom Extension," LABOUR, CEIS, vol. 17(2), pages 285-298, June.
    2. Gilbert Cette & Rémy Lecat & Ahmed Ould Ahmed Jiddou, 2016. "Margin rate and the cycle: the role of trade openness," Applied Economics, Taylor & Francis Journals, vol. 48(37), pages 3569-3575, August.
    3. Sabien Dobbelaere & Jacques Mairesse, 2013. "Panel data estimates of the production function and product and labor market imperfections," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(1), pages 1-46, January.
    4. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.
    5. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2009. "The dynamics of trade and competition," Journal of International Economics, Elsevier, vol. 77(1), pages 50-62, February.
    6. Driffield, Nigel & Pal, Sarmistha, 2006. "Do external funds yield lower returns?: Recent evidence from East Asian economies," Journal of Asian Economics, Elsevier, vol. 17(1), pages 171-188, February.
    7. Xu, Jin, 2012. "Profitability and capital structure: Evidence from import penetration," Journal of Financial Economics, Elsevier, vol. 106(2), pages 427-446.
    8. David Metcalf, 1993. "Industrial Relations and Economic Performance," British Journal of Industrial Relations, London School of Economics, vol. 31(2), pages 255-283, June.
    9. David Metcalf, 1993. "Transformation of British Industrial Relations? Institutions, Conduct and Outcomes 1980-1990," CEP Discussion Papers dp0151, Centre for Economic Performance, LSE.
    10. Vannini, Stefano & Bughin, Jacques, 2000. "To be (unionized) or not to be? A case for cost-raising strategies under Cournot oligopoly," European Economic Review, Elsevier, vol. 44(9), pages 1763-1781, October.
    11. Lukacs, Peter, 1997. "Input contracts, market structure and the empirical specification of price cost margins," Economics Letters, Elsevier, vol. 55(1), pages 139-143, August.
    12. Alan Bevan & Saul Estrin & Mark E. Schaffer, 1999. "Determinants of Enterprise Performance during Transition," CERT Discussion Papers 9903, Centre for Economic Reform and Transformation, Heriot Watt University.
    13. Martin J. Conyon & Sourafel Girma & Steve Thompson & Peter W. Wright, 2004. "Do Wages Rise or Fall Following Merger?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 847-862, December.
    14. Marcos Lima & Marcelo Resende, 2004. "Profit margins and business cycles in the Brazilian industry: a panel data study," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 923-930.
    15. Marc Cowling & Simon Peter Nadeem, 2020. "Entrepreneurial Firms: With Whom Do They Compete, and Where?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 559-577, November.
    16. Herve Boulhol, 2010. "Pro‐competitive Effect of Trade and Non‐decreasing Price‐Cost Margins," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(3), pages 326-356, June.
    17. Metcalf, David, 1993. "Transformation of British industrial relations? Institutions, conduct and outcomes 1980-1990," LSE Research Online Documents on Economics 20981, London School of Economics and Political Science, LSE Library.
    18. Bellak, Christian, 1992. "Towards A Flexible Concept of Competitiveness," Department of Economics Working Paper Series 13, WU Vienna University of Economics and Business.
    19. Maryanchyk Ivan, "undated". "Market Structure and Profitability in a Transition Economy: Ukrainian Case," EERC Working Paper Series 03-06e, EERC Research Network, Russia and CIS.
    20. Peltonen, Tuomas A. & Skala, Martin & Santos Rivera, Alvaro & Pula, Gabor, 2008. "Imports and profitability in the euro area manufacturing sector: the role of emerging market economies," Working Paper Series 918, European Central Bank.
    21. Bughin, Jacques, 1999. "The strategic choice of union-oligopoly bargaining agenda," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 1029-1040, October.
    22. Hristos Doucouliagos & Patrice Laroche, 2009. "Unions and Profits: A meta-regression Analysis," Post-Print hal-00648569, HAL.
    23. Uma S. Kambhampati & Ashok Parikh, 2005. "Has liberalization affected profit margins in Indian Industry?," Bulletin of Economic Research, Wiley Blackwell, vol. 57(3), pages 273-304, July.

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