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Estimating Price- Cost Margins and Scale Economies from a Panel of Microdata

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Abstract

Hall's (1988) approach to study price- cost margins is adapted to simultaneously estimate price- cost margins and scale economies from a panel of plant level data. The paper shows how this methodology provides a very flexible framework with only a few, economically interesting parameters to be estimated. The econometric model is tested and estimated on different panels of plants, covering most manufacturing industries in Norway 1980- 90. The GMM- estimates suggest significant, but quite small, markups in all industries. No industry exhibits increasing returns to scale; the average firm (in all industries) seems to face constant or moderately decreasing returns to scale. Estimates suggest that there is more variation in the price- cost margins and scale coefficients within the fairly narrow industry groups investigated, as compared to between the industry groups. * This paper is a substantially revised version of Klette (1993).

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 130.

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Date of creation: Oct 1994
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Handle: RePEc:ssb:dispap:130

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Related research

Keywords: Market power; scale economies; GMM; specification testing; establishment data;

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Cited by:
  1. Geir H. Bjertnæs & Taran Fæhn, 2004. "Energy Taxation in a Small, Open Economy: Efficiency Gains under Political Restraints," Discussion Papers 387, Research Department of Statistics Norway.
  2. Turid Avitsland & Jorgen Aasness, 2006. "Combining microsimulation and CGE models: Effects on equality of VAT reforms," Computing in Economics and Finance 2006 132, Society for Computational Economics.
  3. Klette, T.J., 1998. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Memorandum 15/1998, Oslo University, Department of Economics.
  4. Brita Bye & Birger Strøm & Turid Åvitsland, 2003. "Welfare effects of VAT reforms: A general equilibrium analysis," Discussion Papers 343, Research Department of Statistics Norway.
  5. Carstensen, Vivian, 2003. "Ein einfaches Verfahren zur Berücksichtigung heterogener Preisbildung und Marktmacht auf unvollkommenen Gütermärkten in Produktivitätsschätzungen," Hannover Economic Papers (HEP) dp-273, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  6. Henriksen, E & Knarvik, K.H.M. & Steen, F., 2001. "Economies of Scale in European Manufacturing Revisited," Papers 12/2001, Norwegian School of Economics and Business Administration-.
  7. Brita Bye & Karine Nyborg, 1999. "The Welfare Effects of Carbon Policies: Grandfathered Quotas versus Differentiated Taxes," Discussion Papers 261, Research Department of Statistics Norway.
  8. Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
  9. Erling Holmøy & Torbjørn Hægeland, 1997. "Aggregate Productivity Effects of Technology Shocks in a Model of Heterogeneous Firms: The Importance of Equilibrium Adjustments," Discussion Papers 198, Research Department of Statistics Norway.
  10. Brita Bye & Turid Åvitsland, 2001. "The welfare effects of housing taxation in a distorted economy: A general equilibrium analysis," Discussion Papers 306, Research Department of Statistics Norway.
  11. Brita Bye, 1998. "Labour Market Rigidities and Environmental Tax Reforms: Welfare Effects of Different Regimes," Discussion Papers 242, Research Department of Statistics Norway.
  12. Turid Åvitsland & Jørgen Aasness, 2004. "Combining CGE and microsimulation models: Effects on equality of VAT reforms," Discussion Papers 392, Research Department of Statistics Norway.
  13. Taran Fæhn & Erling Holmøy, 1999. "Welfare Effects of Trade Liberalisation in Distorted Economies A Dynamic General Equilibrium Assessment for Norway," Discussion Papers 251, Research Department of Statistics Norway.
  14. Taran Fæhn & Erling Holmøy, 2001. "Trade Liberalisation and Effects on Pollutive Emissions and Waste A General Equilibrium Assessment for Norway," Discussion Papers 298, Research Department of Statistics Norway.

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