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Markup and the Business Cycle: Evidence from Italian Manufacturing Branches

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  • Domenica J. Marchetti

    ()
    (Banca d'Italia)

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    Abstract

    This paper investigates the markup of price over marginal cost in Italian manufacturing branches. The approach used is an extension of HallÂ’s model that addresses some measurement shortcomings and theoretical limitations that may affect this class of model. The hypothesis of perfect competition is rejected in the majority of sectors over the period 1977-1995. Data on the cyclical behavior of the markup are found to vary significantly across branches, thereby helping to explain the contradictory evidence regarding the whole manufacturing sector reported in the literature. At sectoral level, industry concentration is found to be associated with anticyclical markups, as suggested by recent theoretical contributions. Finally, the size of the markup is negatively affected by both domestic and foreign competitive pressure.

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    File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td99/td362_99/td362en/tema_362en.pdf
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    Bibliographic Info

    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 362.

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    Date of creation: Dec 1999
    Date of revision:
    Handle: RePEc:bdi:wptemi:td_362_99

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    Postal: Via Nazionale, 91 - 00184 Roma
    Web page: http://www.bancaditalia.it
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    Related research

    Keywords: markup; business cycle; imperfect competition; manufacturing;

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    Cited by:
    1. Monica Paiella, 2003. "Revisiting the Implications of Heterogeneity in Financial Market Participation for the C-CAPM," Temi di discussione (Economic working papers) 473, Bank of Italy, Economic Research and International Relations Area.
    2. Antonio Bassanetti & Massimiliano Iommi & Cecilia Jona-Lasinio & Francesco Zollino, 2004. "La crescita dell'economia italiana negli anni novanta tra ritardo tecnologico e rallentamento della produttività ," Temi di discussione (Economic working papers) 539, Bank of Italy, Economic Research and International Relations Area.
    3. Michele Benvenuti & Marco Gallo, 2004. "Perché le imprese ricorrono al factoring? Il caso dell'Italia," Temi di discussione (Economic working papers) 518, Bank of Italy, Economic Research and International Relations Area.
    4. Eugenio Gaiotti, 2004. "Pitfalls of monetary policy under incomplete information: imprecise indicators and real indeterminacy," Macroeconomics 0404017, EconWPA, revised 26 Apr 2004.
    5. Luca Casolaro & Leonardo Gambacorta, 2004. "Un modello dei conti economici per il sistema bancario italiano," Temi di discussione (Economic working papers) 519, Bank of Italy, Economic Research and International Relations Area.
    6. Claudia Biancotti & Giovanni D'Alessio & Andrea Neri, 2004. "Errori di misura nellÂ’indagine sui bilanci delle famiglie italiane," Temi di discussione (Economic working papers) 520, Bank of Italy, Economic Research and International Relations Area.
    7. Fabio Panetta, 2003. "Evoluzione del sistema bancario e finanziamento dellÂ’economia nel Mezzogiorno," Temi di discussione (Economic working papers) 467, Bank of Italy, Economic Research and International Relations Area.
    8. Francesco Columba, 2004. "Transaction Technology Innovation and Demand for Overnight Deposits in Italy," Macroeconomics 0404011, EconWPA.
    9. Francesco Spadafora, 2004. "Il pilastro privato del sistema previdenziale. Il caso del Regno Unito," Temi di discussione (Economic working papers) 503, Bank of Italy, Economic Research and International Relations Area.
    10. Paolo Angelini & Paolo Del Giovane & Stefano Siviero & Daniele Terlizzese, 2002. "Monetary Policy Rules for the Euro Area: What Role for National Information?," Temi di discussione (Economic working papers) 457, Bank of Italy, Economic Research and International Relations Area.
    11. Carla Massidda, 2005. "Estimating the New Keynesian Phillips Curve for Italian Manufacturing Sectors," Working Papers 2005.12, Fondazione Eni Enrico Mattei.
    12. Paolo Finaldi Russo & Luigi Leva, 2004. "Il debito commerciale in Italia: quanto contano le motivazioni finanziarie?," Temi di discussione (Economic working papers) 496, Bank of Italy, Economic Research and International Relations Area.
    13. Paolo Chiades & Massimo Gallo & Andrea Venturini, 2003. "LÂ’utilizzo degli indicatori compositi nell'analisi congiunturale territoriale: un'applicazione all'economia del Veneto," Temi di discussione (Economic working papers) 485, Bank of Italy, Economic Research and International Relations Area.
    14. Matteo Bugamelli & Alfonso Rosolia, 2006. "Productivity and foreign competition," Temi di discussione (Economic working papers) 578, Bank of Italy, Economic Research and International Relations Area.
    15. Paolo Del Giovane & Roberto Sabbatini, 2004. "LÂ’introduzione dellÂ’euro e la divergenza tra infl azione rilevata e percepita," Temi di discussione (Economic working papers) 532, Bank of Italy, Economic Research and International Relations Area.

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