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Price-Cost Margins, Exports and Productivity Growth: With an Application to Canadian Industries

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  • Jeffrey I. Bernstein
  • Pierre Mohnen

Abstract

A model is estimated for oligopolistic industries producing multiple outputs in short-run equilibrium. Outputs are sold domestically and exported, while capital is treated as a quasi-fixed factor. The model is applied to the Canadian non-electrical machinery, electrical products, and chemical products industries. The results show that there is significant oligopoly power in each of the industries and that the degree of this power differs between the domestic and export markets. Total factor productivity is decomposed. Price-cost margins exert little influence but the rate of technological change, returns to scale, and the rate of capital adjustment determine productivity growth.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 24 (1991)
Issue (Month): 3 (August)
Pages: 638-59

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Handle: RePEc:cje:issued:v:24:y:1991:i:3:p:638-59

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References

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  1. Bernstein, Jeffrey I, 1989. "An Examination of the Equilibrium Specification and Structure of Production for Canadian Telecommunications," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(3), pages 265-82, July-Sept.
  2. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  3. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
  4. Mohnen, P, 1987. "The Effects of U.S. Shocks on Canadian Total Factor Productivity Growth: The Case of the Electrical Products Industry," Empirical Economics, Springer, vol. 12(4), pages 221-47.
  5. Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-25, November.
  6. Diewert, W. E., 1977. "Generalized slutsky conditions for aggregate consumer demand functions," Journal of Economic Theory, Elsevier, vol. 15(2), pages 353-362, August.
  7. Gollop, Frank M. & Roberts, Mark J., 1979. "Firm interdependence in oligopolistic markets," Journal of Econometrics, Elsevier, vol. 10(3), pages 313-331, August.
  8. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
  9. Kulatilaka, Nalin, 1985. "Tests on the validity of static equilibrium models," Journal of Econometrics, Elsevier, vol. 28(2), pages 253-268, May.
  10. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
  11. Iwata, Gyoichi, 1974. "Measurement of Conjectural Variations in Oligopoly," Econometrica, Econometric Society, vol. 42(5), pages 947-66, September.
  12. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
  13. Elie Appelbaum & Ulrich R. Kohli, 1979. "Canada-United States Trade: Tests for the Small-Open-Economy Hypothesis," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 1-14, February.
  14. Schankerman, Mark & Nadiri, M. Ishaq, 1986. "A test of static equilibrium models and rates of return to quasi-fixed factors, with an application to the Bell system," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 97-118.
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Citations

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Cited by:
  1. Jeffery Bernstein, 1991. "Price Margins and Capital Adjustment: Canadian Mill Products and Pulp and Paper Industries," Carleton Economic Papers 91-07, Carleton University, Department of Economics, revised Sep 1992.
  2. Marcin Pracz & Rod Tyers, 2006. "Strategic Interaction amongst Australia’s East Coast Ports," ANU Working Papers in Economics and Econometrics 2006-471, Australian National University, College of Business and Economics, School of Economics.
  3. Jeffrey Bernstein & Pierre Mohnen, . "International R&D Spillovers Between U.S. and Japanese R&D Intensive Sectors," Carleton Industrial Organization Research Unit (CIORU) 94-04, Carleton University, Department of Economics.
  4. Soete,Luc & Weel,Bas,ter, 1999. "Schumpeter and the Knowledge-Based Economy: On Technology and Competition Policy," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Bernstein, Jeffrey & Shah, Anwar, 1993. "Corporate tax structure and production," Policy Research Working Paper Series 1196, The World Bank.
  6. Moreno, L & Rodríguez, D, 2010. "Markups, bargaining power and offshoring: an empirical assessment," MPRA Paper 23587, University Library of Munich, Germany.
  7. Diego Rodriguez & Lourdes Moreno, 2013. "The effect of international trade on markups distribution," Economics and Business Letters, Oviedo University Press, vol. 2(1).
  8. repec:spo:wpecon:info:hdl:2441/6123 is not listed on IDEAS
  9. Thijs Raa & Pierre Mohnen, 2002. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," Journal of Productivity Analysis, Springer, vol. 18(2), pages 111-128, September.
  10. Soete,Luc & Weel,Bas,ter, 1999. "Innovation, Knowledge Creation and Technology Policy in Europe," Research Memorandum 001, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  11. M. Ishaq Nadiri & Banani Nandi, 1996. "The Changing Structure of Cost and Demand for the U.S. Telecommunications Industry," NBER Working Papers 5820, National Bureau of Economic Research, Inc.
  12. Sarah Guillou & Stefano Schiavo, 2007. "Export prices and increasing world competition: evidence from French, German, and Italian pricing behavior," Documents de Travail de l'OFCE 2007-25, Observatoire Francais des Conjonctures Economiques (OFCE).
  13. Bruinshoofd,Allard & Hollanders,Hugo & Weel,Bas,ter, 1999. "Knowledge Spillovers and Wage Inequality: An Empirical Investigation of Knowledge-Skill Complementarity," Research Memorandum 008, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).

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