The cyclicality of mark-ups and profit margins for the United Kingdom: some new evidence
AbstractIn this paper, we assess the cyclicality of mark-ups and profit margins within the United Kingdom, at both the aggregate and industry level. We find that the private sector labour share moves countercyclically, suggesting that the aggregate mark-up moves procyclically. This result survives when we consider more sophisticated measures of the mark-up. And this result is also supported by industry-level data. We find that the aggregate market sector profit share moves procyclically and that the cyclical behaviour of profit margins is largely homogenous across industries. Nevertheless, there is some evidence that margins moved against the cycle in the late 1990s, starting to fall in 1997, whereas GDP growth did not peak until 2000. In tandem with these cyclical movements, we also find that the market sector profit share has trended upwards since 1970, in contrast to the aggregate mark-up, which fell over the same period.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 351.
Length: 44 pages
Date of creation: Aug 2008
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Mark-ups; profit margins.;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-BEC-2008-09-20 (Business Economics)
- NEP-EEC-2008-09-20 (European Economics)
- NEP-MAC-2008-09-20 (Macroeconomics)
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