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Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms

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  • Machin, Stephen
  • Van Reenen, John

Abstract

This paper presents some empirical models of profitability using panel data covering 709 large U.K. companies ove r the 1970s and 1980s, focusing specifically on the role of aggregate demand shocks in shaping firm-level profitability. In basic regressi ons and in quite complex econometric models, the results suggest that firm-level profit margins fell heavily during the deep manufacturing recession of the early 1980s and, as such, are consistent with model s predicting the procyclical nature of profit margins. This result hol ds across different product groups (producer goods, consumer durables a nd nondurables), though the timing of the impact of aggregate shocks appears to differ. Copyright 1993 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 41 (1993)
Issue (Month): 1 (March)
Pages: 29-50

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Handle: RePEc:bla:jindec:v:41:y:1993:i:1:p:29-50

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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