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Estimation of the Cyclical Behaviour of Mark-ups: A Technical Note

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  • Joaquim Oliveira Martins
  • Stefano Scarpetta

Abstract

This paper presents estimates of the cyclical fluctuations of price-cost margins, following an extended version of the Rotemberg and Woodford (1991) approach. The results support the hypothesis of counter-cyclical price margins in most manufacturing industries, especially in the presence of downward rigidities of labour inputs. This is consistent with a growing body of empirical literature showing that economic booms tend to increase competition or decrease the incentives for collusion, thereby creating downward pressures on price margins. It also offers an appealing interpretation of the otherwise puzzling pro-cyclicality of real wages.

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File URL: http://dx.doi.org/10.1787/eco_studies-v2002-art6-en
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Bibliographic Info

Article provided by OECD Publishing in its journal OECD Economic Studies.

Volume (Year): 2002 (2002)
Issue (Month): 1 ()
Pages: 173-188

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Handle: RePEc:oec:ecokaa:5lmqcr2k2c33

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Citations

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Cited by:
  1. Holger Görg & Frederic Warzynski, 2003. "Price Cost Margins and Exporting Behaviour: Evidence from Firm Level Data," Discussion Papers of DIW Berlin 365, DIW Berlin, German Institute for Economic Research.
  2. Maurin, Laurent & Roma, Moreno & Vetlov, Igor, 2011. "Profit dynamics across the largest euro area countries and sectors," Working Paper Series 1410, European Central Bank.
  3. Hervé Boulhol, 2008. "The Convergence of Price–cost Margins," Open Economies Review, Springer, vol. 19(2), pages 221-240, April.
  4. Alain Gabler, 2008. "Sector-specific Markup Fluctuations and the Business Cycle," 2008 Meeting Papers 88, Society for Economic Dynamics.
  5. Declerck, Francis & Viviani, Jean-Laurent, 2012. ""Solvency and Performance of French Wineries in Times of Declining Sales: Co-operatives and Corporations”," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 3(2).
  6. Hervé Boulhol, 2005. "Why haven't price-cost margins decreased with globalization ?," Cahiers de la Maison des Sciences Economiques bla06007, Université Panthéon-Sorbonne (Paris 1).
  7. Afonso, António & Costa, Luís F., 2010. "Market power and fiscal policy in OECD countries," Working Paper Series 1173, European Central Bank.
  8. Pontuch, Peter, 2011. "Product Market Concentration, Financing Constraints, and Firms' Business Cycle Sensitivity," Economics Papers from University Paris Dauphine 123456789/6271, Paris Dauphine University.
  9. repec:hal:journl:halshs-00195890 is not listed on IDEAS
  10. repec:hal:journl:halshs-00193915 is not listed on IDEAS
  11. Paulo Brito & Luís Costa & Huw Dixon, 2010. "Non-Smooth Dynamics and Multiple Equilibria in a Cournt-Ramsey Model with Endogenous Markups," Working Papers Department of Economics 2010/14, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  12. Luís Costa, 2006. "Entry and fiscal policy effectiveness in a small open economy within a Monetary Union," Portuguese Economic Journal, Springer, vol. 5(1), pages 45-65, May.
  13. Camille Logeay & Silke Tober, 2003. "Time-varying Nairu and Real Interest Rates in the Euro Area," Discussion Papers of DIW Berlin 351, DIW Berlin, German Institute for Economic Research.
  14. repec:hal:cesptp:halshs-00084267 is not listed on IDEAS
  15. Ali Abcha, 2014. "Imperfect competition, government spending and estimated markup," EconomiX Working Papers 2014-11, University of Paris West - Nanterre la Défense, EconomiX.

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