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The Determinants of the Price-Cost Margins of the Manufacturing Firms in Turkey

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  • Ali Culha
  • Cihan Yalcin

Abstract

This study examines the determinants of the price-cost margins in the Turkish manufacturing industry spanning from 1995 to 2003. The literature on this subject points to the importance of market structure, business cycles and input costs. Utilizing panel data econometric techniques on a large number of manufacturing firms by conditioning on their firm size, age, ownership and export orientation, the study finds that there exists a marked difference among the firms’ pricing behaviors according to their market share. Import penetration seems to be ineffective to reduce the price-cost margins of large, high market share and foreign partner firms, while exporting activity was observed to act as a factor to enhance competition. The analysis also suggests that price-cost margins behave pro-cyclically in general and an appreciation of the domestic currency reduces price-cost margins by way of lowering input costs.

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File URL: http://www.tcmb.gov.tr/research/discus/WP0515ENG.pdf
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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0515.

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Date of creation: 2005
Date of revision:
Handle: RePEc:tcb:wpaper:0515

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Keywords: Price-cost margins; Market Structure; Import Penetration;

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References

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  1. Sharpe, Steven A, 1994. "Financial Market Imperfections, Firm Leverage, and the Cyclicality of Employment," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 1060-74, September.
  2. Jacquemin, Alexis, 1982. "Imperfect Market Structure and International Trade-Some Recent Research," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 35(1), pages 75-93.
  3. Foroutan, Faezeh, 1991. "Foreign trade and its relation to competition and productivity in Turkish industry," Policy Research Working Paper Series, The World Bank 604, The World Bank.
  4. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Erinç Yeldan & Ebru Voyvoda, 1999. "Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing," Departmental Working Papers, Bilkent University, Department of Economics 9911, Bilkent University, Department of Economics.
  6. Cihan Yalcin, 2000. "Price-Cost Margins and Trade Liberalization in Turkish Manufacturing Industry : A Panel Data Analysis," Discussion Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0001, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  7. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
  8. Caves, Richard E., 1985. "International trade and industrial organization: Problems, solved and unsolved," European Economic Review, Elsevier, Elsevier, vol. 28(3), pages 377-395, August.
  9. Evren Ceritoglu, 2002. "The Cyclicality Of Mark-Up Ratios : The Case Of Turkish Industry," Working Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0204, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  10. Richard Cantor, 1990. "Effects of leverage on corporate investment and hiring decisions," Quarterly Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Sum, pages 31-41.
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Cited by:
  1. Akbar Ullah & Ejaz Ghani & Attiya Y. Javed, 2013. "Market Power and Industrial Performance in Pakistan," PIDE-Working Papers, Pakistan Institute of Development Economics 2013:88, Pakistan Institute of Development Economics.
  2. Saatci, Mustafa & Aslan, Alper, 2007. "TÜRKİYE İMALAT SANAYİNDE İTHALATIN PİYASAYI DİSİPLİNE ETME HİPOTEZİNİN TESTİ: PANEL VERi YAKLASIMI," MPRA Paper 10604, University Library of Munich, Germany.
  3. Aslan, Alper & Kula, Ferit, 2008. "Türkiye İmalat Sanayinde Fiyat-Maliyet Marjları: Dönemler ve Sektörler İtibariyle Karsılastırmalı Bir Analiz," MPRA Paper 10606, University Library of Munich, Germany.

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