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Markup, Returns To Scale, The Business Cycle And Openness: Evidence From Australian Manufacturing


  • Michael Olive


A Hall type model that includes intermediate materials in the production function and allows for non-stochastic time variation in the contribution of technical change to output growth is used to estimate markup and returns to scale for eight Australian manufacturing industries at approximately the two-digit level, during the period 1971-72 to 1984-85. Six of the eight manufacturing industries indicate markups that are greater than one, implying the widespread existence of market power in Australian manufacturing. Constant returns to scale are not rejected for any individual industry or jointly. Markups are generally found to be pro-cyclical, although there is some evidence to suggest that this relationship is not as strong in industries that are open to the international economy.
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Suggested Citation

  • Michael Olive, 2004. "Markup, Returns To Scale, The Business Cycle And Openness: Evidence From Australian Manufacturing," Economic Papers, The Economic Society of Australia, vol. 23(1), pages 44-57, March.
  • Handle: RePEc:bla:econpa:v:23:y:2004:i:1:p:44-57
    DOI: j.1759-3441.2004.tb00352.x

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    Cited by:

    1. Salman Ahmad & Attiya Yasmin Javid, 2015. "Analysing the Price Cost Markup and Its Behaviour over the Business Cycles in Case of Manufacturing Industries of Pakistan," PIDE-Working Papers 2015:117, Pakistan Institute of Development Economics.
    2. Mustafa Utku Özmen, 2020. "In Pursuit Of Understanding Markups In Restaurant Services Prices," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1423-1437, December.
    3. Sasan Bakhtiari, 2011. "Size Evolution and Outsourcing: Theory and Evidence from Australian Manufacturing," Discussion Papers 2012-08, School of Economics, The University of New South Wales.
    4. Nikola Bokan & Lovorka Grgurić & Ivo Krznar & Maroje Lang, 2009. "The Impact of the Financial Crisis and Policy Responses in Croatia," Working Papers 22, The Croatian National Bank, Croatia.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing


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