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Markups in U.S. and Japanese Manufacturing: A Short-Run Econometric Analysis

  • Morrison, Catherine J

In this study a production theory model of firms' markup behavior is constructed based on variants of generalized Leontief cost and expenditure functions with adjustment costs and scale economies. Results from empirical implementation of this model for U.S. and Japanese manufacturing from 1960 through 1981 suggest that markups for both countries have increased over time, but their cyclicality varies due primarily to differential investment behavior. In addition, capacity utilization and especially scale economies tend to counteract the short run profit potential from markup behavior, so that markups measured ignoring these impacts may be biased downward. Finally, both supply and demand shocks appear to have a significant systematic impact on markups.

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Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 10 (1992)
Issue (Month): 1 (January)
Pages: 51-63

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Handle: RePEc:bes:jnlbes:v:10:y:1992:i:1:p:51-63
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  1. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
  2. 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.
  3. Berndt, Ernst R & Khaled, Mohammed S, 1979. "Parametric Productivity Measurement and Choice among Flexible Functional Forms," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1220-45, December.
  4. Morrison, Catherine J, 1985. "Primal and Dual Capacity Utilization: An Application to Productivity Measurement in the U.S. Automobile Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 312-24, October.
  5. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
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