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The Dynamics of Price Cost Margins: Evidence from UK Manufacturing

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  • Holger Görg
  • Frederic Warzynski

Abstract

This paper estimates the dynamics of price cost margins in UK manufacturing over the period 1989-1997 and links it to the implementation of the Single Market Program. Using the Hall-Roeger methodology, we find a dramatic decline in price cost margins by 25% after 1990. This suggests that firms anticipated the competitive shock induced by the Single Market Program, which created a more competitive environment. JEL Classification: F1, L1, L6.

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Bibliographic Info

Article provided by Presses de Sciences-Po in its journal Revue de l'OFCE.

Volume (Year): 97 bis (2006)
Issue (Month): 5 ()
Pages: 303-318

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Handle: RePEc:cai:reofsp:reof_073_0303

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Web page: http://www.cairn.info/revue-de-l-ofce.htm

Related research

Keywords: single market program; price cost margins; UK; firm-level data;

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References

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  1. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, Elsevier, vol. 45(1), pages 167-186, January.
  2. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Julio J. Rotemberg & Michael Woodford, 1999. "The Cyclical Behavior of Prices and Costs," NBER Working Papers 6909, National Bureau of Economic Research, Inc.
  4. Haskel, Jonathan & Martin, Christopher & Small, Ian, 1995. "Price, Marginal Cost and the Business Cycle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 25-41, February.
  5. Klette, T.J., 1998. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Memorandum, Oslo University, Department of Economics 15/1998, Oslo University, Department of Economics.
  6. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 921-47, October.
  7. Warzynski, Frederic, 2001. "Did tough antitrust policy lead to lower mark-ups in the US manufacturing industry?," Economics Letters, Elsevier, Elsevier, vol. 70(1), pages 139-144, January.
  8. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2001. "The dynamics of industrial mark-ups in two small open economies: does national competition policy matter?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(5), pages 841-859, April.
  9. Machin, Stephen & Van Reenen, John, 1993. "Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 29-50, March.
  10. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers, Institute for Fiscal Studies W01/12, Institute for Fiscal Studies.
  11. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
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Cited by:
  1. Lionel Nesta & Flora Bellone & Patrick Musso & Frédéric Warzynski, 2008. "L'effet pro-concurrentiel de l'intégration européenne : une analyse de l'évolution des taux de marge dans les industries manufacturières françaises," Sciences Po publications 2008-09, Sciences Po.
  2. Christopoulou, Rebekka & Vermeulen, Philip, 2008. "Markups in the euro area and the US over the period 1981-2004: a comparison of 50 sectors," Working Paper Series, European Central Bank 0856, European Central Bank.
  3. repec:spo:wpecon:info:hdl:2441/6153 is not listed on IDEAS

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