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The Cyclical Nature of Markups in Canadian Manufacturing: A Production Theory Approach

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Author Info
Morrison, C J

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Abstract

In this paper the effects of cost and demand characteristics on the magnitude and cyclical behaviour of markups in Canadian manufacturing are measured within a production theory framework. Price to marginal cost ratios for various manufacturing industries are computed, and the impact on their secular and cyclical trends from changes in capacity utilization, scale economies, variable input prices, import competition, unemployment and other exogenous market and technological determinants are explored using adjusted markup indexes and elasticities. The measured price margins seem weakly procyclical. Further, evaluation of the determinants of these cycles suggests that the procyclical nature of markups is primarily related to exogenous factors affecting costs such as energy price "shocks," and that cost characteristics underlying scale economies provide a countercyclical influence that counteracts the profitability arising from markups. Copyright 1994 by John Wiley & Sons, Ltd.

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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 9 (1994)
Issue (Month): 3 (July-Sept.)
Pages: 269-82
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Handle: RePEc:jae:japmet:v:9:y:1994:i:3:p:269-82

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  1. Domenica J. Marchetti, 1999. "Markup and the Business Cycle: Evidence from Italian Manufacturing Branches," Temi di discussione (Economic working papers) 362, Bank of Italy, Economic Research Department. [Downloadable!]
  2. Altug, Sumru G. & Filiztekin, Alpay, 1999. "Estimates of the Returns to Scale for US Manufacturing," CEPR Discussion Papers 2121, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Nicolas Canry & Julien Fouquau & Sébastien Lechevalier, 2007. "Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140624_v1, HAL. [Downloadable!]
    Other versions:
  4. Danny Leung, 2008. "Markups in Canada: Have They Changed and Why?," Working Papers 08-7, Bank of Canada. [Downloadable!]
  5. Sabina Pogorelec, 2006. "Fiscal and monetary policy in the enlarged European Union," Working Paper Series 655, European Central Bank. [Downloadable!]
  6. Feenstra, T. & Kort, P. & Zeeuw, A. de, 1997. "Environmental policy in an international duopoly : an analysis of feedback investment strategies," Discussion Paper 43, Tilburg University, Center for Economic Research. [Downloadable!]
  7. Warren, Paul, 2005. "Rentabilité des entreprises sous contrôle canadien par rapport aux entreprises sous contrôle américain," Série de documents de recherche sur l'analyse économique (AE) 2005030f, Statistics Canada, Direction des études analytiques. [Downloadable!]
  8. Warren, Paul, 2005. "Profitability of Canadian- Versus U.S.-controlled Enterprises," Economic Analysis (EA) Research Paper Series 2005030e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  9. Anna Lipinska, 2008. "The Maastricht Convergence Criteria and Optimal Monetary Policy for the EMU Accession Countries," Working Paper Series 896, European Central Bank. [Downloadable!]
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  10. Ian Small, . "The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services," Bank of England working papers 72, Bank of England. [Downloadable!]
  11. Domenico Marchetti, 2002. "Markups and the Business Cycle: Evidence from Italian Manufacturing Branches," Open Economies Review, Springer, vol. 13(1), pages 87-103, January. [Downloadable!] (restricted)
  12. Lipinska, Anna, 2008. "The Maastricht Criteria and Optimal Monetary and Fiscal Policy Mix for the EMU Accession Countries," MPRA Paper 16376, University Library of Munich, Germany. [Downloadable!]
  13. Martine Carre & Fabrice Collard, 2000. "Monetary Union: A Welfare Based Approach," Econometric Society World Congress 2000 Contributed Papers 0526, Econometric Society. [Downloadable!]
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