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The cyclicality of mark-ups and profit margins for the United Kingdom: some new evidence

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  • Macallan, Clare

    ()
    (Bank of England)

  • Millard, Stephen

    ()
    (Bank of England)

  • Parker, Miles

    ()
    (Bank of England)

Abstract

In 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 Info

Paper provided by Bank of England in its series Bank of England working papers with number 351.

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Length: 44 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:boe:boeewp:0351

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Keywords: Mark-ups; profit margins.;

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Cited by:
  1. Maurin, Laurent & Roma, Moreno & Vetlov, Igor, 2011. "Profit dynamics across the largest euro area countries and sectors," Working Paper Series, European Central Bank 1410, European Central Bank.
  2. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8384, C.E.P.R. Discussion Papers.
  3. David Blanchflower, 2009. "Where Next For The Uk Economy?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(1), pages 1-23, 02.
  4. Koski, Heli & Pajarinen, Mika, 2013. "Empirical Evaluation of the Effectiveness of Competition Policy," ETLA Working Papers, The Research Institute of the Finnish Economy 15, The Research Institute of the Finnish Economy.
  5. Jennifer V. Greenslade & Miles Parker, 2012. "New Insights into Price‐Setting Behaviour in the UK: Introduction and Survey Results," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 122(558), pages F1-F15, 02.
  6. David Norman & Anthony Richards, 2012. "The Forecasting Performance of Single Equation Models of Inflation," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 88(280), pages 64-78, 03.
  7. Günes Kamber & Stephen Millard, 2012. "Using Estimated Models to Assess Nominal and Real Rigidities in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 97-119, December.
  8. Nir Klein, 2011. "South Africa," IMF Working Papers 11/204, International Monetary Fund.
  9. Stirati, Antonella, 2014. "Real wages in the business cycle: an unresolved conflict between theory and facts in mainstream macroeconomics," MPRA Paper 53743, University Library of Munich, Germany.
  10. David Norman & Anthony Richards, 2010. "Modelling Inflation in Australia," RBA Research Discussion Papers, Reserve Bank of Australia rdp2010-03, Reserve Bank of Australia.
  11. Greenslade, Jennifer & Parker, Miles, 2010. "New insights into price-setting behaviour in the United Kingdom," Bank of England working papers, Bank of England 395, Bank of England.

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