Estimating Price- Cost Margins and Scale Economies from a Panel of Microdata
AbstractHall'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 InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 130.
Date of creation: Oct 1994
Date of revision:
Market power; scale economies; GMM; specification testing; establishment data;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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