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Price Margins and Capital Adjustment: Canadian Mill Products and Pulp and Paper Industries

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Jeffrey I. Bernstein

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Abstract

The purpose of this paper is to estimate a model incorporating noncompetitive behaviour in product and factor markets, In addition, capital accumulation is subject to adjustment costs so that firms are not constrained to be in long-run equilibrium. The model is applied to two major Canadian manufacturing industries: pulp and paper and mill products. The results show for both industries in each of the three product markets and the wood input market that there is competitive behaviour. In addition, the industries are not in long-run equilibrium as marginal adjustment costs cause marginal profit to exceed the rental rate on capital. With the industries exhibiting short-run competitive behaviour in product and factor markets, new estimates are derived for scale economies and rates of technological change. Unlike the results from other studies, both industries exhibit small scale economies and positive rates of technological change.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3982.

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Date of creation: Dec 1992
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Handle: RePEc:nbr:nberwo:3982

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1989. "Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality," NBER Working Papers 2002, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Jorgenson, Dale W., 1986. "Econometric methods for modeling producer behavior," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 31, pages 1841-1915 Elsevier. [Downloadable!] (restricted)
  3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  4. Treadway, Arthur B, 1971. "The Rational Multivariate Flexible Accelerator," Econometrica, Econometric Society, vol. 39(5), pages 845-55, September. [Downloadable!] (restricted)
  5. Epstein, Larry G. & Yatchew, Adonis J., 1985. "The empirical determination of technology and expectations : A simplified procedure," Journal of Econometrics, Elsevier, vol. 27(2), pages 235-258, February. [Downloadable!] (restricted)
  6. Mohnen, Pierre A. & Nadiri, M. Ishaq & Prucha, Ingmar R., 1986. "R&D, production structure and rates of return in the U.S., Japanese and German manufacturing sectors: A non-separable dynamic factor demand model," European Economic Review, Elsevier, vol. 30(4), pages 749-771, August. [Downloadable!] (restricted)
  7. Pindyck, Robert S & Rotemberg, Julio J, 1983. "Dynamic Factor Demands and the Effects of Energy Price Shocks," American Economic Review, American Economic Association, vol. 73(5), pages 1066-79, December. [Downloadable!] (restricted)
  8. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August. [Downloadable!] (restricted)
  9. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February. [Downloadable!] (restricted)
  10. Morrison, C. J. & Berndt, E. R., 1981. "Short-run labor productivity in a dynamic model," Journal of Econometrics, Elsevier, vol. 16(3), pages 339-365, August. [Downloadable!] (restricted)
  11. Roberts, Mark J., 1984. "Testing oligopolistic behavior," International Journal of Industrial Organization, Elsevier, vol. 2(4), pages 367-383, December. [Downloadable!] (restricted)
  12. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier. [Downloadable!] (restricted)
  13. Elie Appelbaum & Ulrich R. Kohli, 1979. "Canada-United States Trade: Tests for the Small-Open-Economy Hypothesis," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 1-14, February. [Downloadable!] (restricted)
  14. Epstein, Larry G., 1982. "Comparative dynamics in the adjustment-cost model of the firm," Journal of Economic Theory, Elsevier, vol. 27(1), pages 77-100, June. [Downloadable!] (restricted)
  15. Jeffrey I. Bernstein & Pierre Mohnen, 1991. "Price-Cost Margins, Exports and Productivity Growth: With an Application to Canadian Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 638-59, August. [Downloadable!] (restricted)
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  16. Catherine J. Morrison, 1989. "Unraveling the Productivity Growth Slowdown in the U.S., Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markup," NBER Working Papers 2993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Geroski, Paul A, 1988. "In Pursuit of Monopoly Power: Recent Quantitative Work in Industrial Economics," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(2), pages 107-23, April. [Downloadable!] (restricted)
  18. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September. [Downloadable!] (restricted)
  19. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bertrand Koebel, 2000. "Prix virtuels en analyse de la production," Annales d'Economie et de Statistique, ADRES, issue 57, pages 10, Janvier-M. [Downloadable!]
  2. Elena Huergo, 1998. "Identificación del poder de mercado: estimaciones para la industria española," Investigaciones Economicas, Fundación SEPI, vol. 22(1), pages 69-91, January. [Downloadable!]
  3. Besanko, David & Doraszelski, Ulrich & Lu, Lauren Xiaoyuan & Satterthwaite, Mark, 2008. "Lumpy Capacity Investment and Disinvestment Dynamics," CEPR Discussion Papers 6788, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Isayenko Oleksiy & Maryanchyk Ivan, 2006. "Market power in oligopoly: The case of the Ukrainian cement industry," EERC Working Paper Series 06-06e, EERC Research Network, Russia and CIS. [Downloadable!]
  5. Bernstein, J.I. & Nadiri, M.I., 1993. "Production, Financial Structure and Productivity Growth in U.S. Manufacturing," Working Papers 93-10, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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