IDEAS home Printed from https://ideas.repec.org/a/cai/reofsp/reof_073_0303.html
   My bibliography  Save this article

The Dynamics of Price Cost Margins: Evidence from UK Manufacturing

Author

Listed:
  • Holger Görg
  • Frédéric Warzynski

Abstract

This paper estimates the dynamics of price cost margins in UK manufacturing over the period 1989-1997 and links it to the implementation of the Single Market Program. Using the Hall-Roeger methodology, we find a dramatic decline in price cost margins by 25% after 1990. This suggests that firms anticipated the competitive shock induced by the Single Market Program, which created a more competitive environment. JEL Classification: F1, L1, L6.

Suggested Citation

  • Holger Görg & Frédéric Warzynski, 2006. "The Dynamics of Price Cost Margins: Evidence from UK Manufacturing," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 303-318.
    • Handle: RePEc:cai:reofsp:reof_073_0303
    as

    Download full text from publisher

    File URL: http://www.cairn.info/load_pdf.php?ID_ARTICLE=REOF_073_0303
    Download Restriction: free
    File URL: http://www.cairn.info/revue-de-l-ofce-2006-5-page-303.htm
    Download Restriction: free

    References listed on IDEAS

    as
    1. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2001. "The dynamics of industrial mark-ups in two small open economies: does national competition policy matter?," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 841-859, April.
    2. Warzynski, Frederic, 2001. "Did tough antitrust policy lead to lower mark-ups in the US manufacturing industry?," Economics Letters, Elsevier, vol. 70(1), pages 139-144, January.
    3. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
    4. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    5. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers W01/12, Institute for Fiscal Studies.
    6. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    7. Haskel, Jonathan & Martin, Christopher & Small, Ian, 1995. "Price, Marginal Cost and the Business Cycle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 25-41, February.
    8. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    9. Machin, Stephen & Van Reenen, John, 1993. "Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 29-50, March.
    10. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.),Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135, Elsevier.
    11. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Flora Bellone & Patrick Musso & Lionel Nesta & Frédéric Warzynski, 2009. "L'effet pro-concurrentiel de l'intégration européenne. Une analyse de l'évolution des taux de marge dans les industries manufacturières françaises," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 139-163.
    2. Chrysovalantis Amountzias, 2018. "The Effects of Competition, Liquidity and Exports on Markups: Evidence from the UK Food and Beverages Sector," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 187-208, June.
    3. Rebekka Christopoulou & Philip Vermeulen, 2012. "Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors," Empirical Economics, Springer, vol. 42(1), pages 53-77, February.
    4. repec:spo:wpecon:info:hdl:2441/6153 is not listed on IDEAS
    5. Cohen, François & Glachant, Matthieu & Söderberg, Magnus, 2017. "Consumer myopia, imperfect competition and the energy efficiency gap: Evidence from the UK refrigerator market," European Economic Review, Elsevier, vol. 93(C), pages 1-23.
    6. Chrysovalantis Amountzias, 2019. "Pricing Decisions and Competitive Conduct Across Manufacturing Sectors: Evidence from 19 European Union Manufacturing Industries," Journal of Industry, Competition and Trade, Springer, vol. 19(3), pages 413-440, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 2008 - 2015 192, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.
    3. Andrea Vaona, 2016. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins in the fourth Kondratieff wave," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 155-170, August.
    4. Flora Bellone & Patrick Musso & Lionel Nesta & Frédéric Warzynski, 2009. "L'effet pro-concurrentiel de l'intégration européenne. Une analyse de l'évolution des taux de marge dans les industries manufacturières françaises," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 139-163.
    5. Jozef Konings & Patrick Van Cayseele & Frédéric Warzynski, 2010. "The Implementation of National Competition Policy Law and the Dynamics of Price–Cost Margins: Evidence from Belgium and the Netherlands 1993–1999," Chapters, in: Jean-Luc Gaffard & Evens Salies (ed.),Innovation, Economic Growth and the Firm, chapter 9, Edward Elgar Publishing.
    6. 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.
    7. Warren, Paul, 2005. "Rentabilité des entreprises sous contrôle canadien par rapport aux entreprises sous contrôle américain," Série de documents de recherche sur l'analyse économique (AE) 2005030f, Statistics Canada, Direction des études analytiques.
    8. Okada, Yosuke, 2005. "Competition and productivity in Japanese manufacturing industries," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 586-616, December.
    9. Ghosal, Vivek, 2000. "Product market competition and the industry price-cost markup fluctuations:: role of energy price and monetary changes," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 415-444, April.
    10. Holger Görg & Frederic Warzynski, 2003. "Price Cost Margins and Exporting Behaviour: Evidence from Firm Level Data," Discussion Papers of DIW Berlin 365, DIW Berlin, German Institute for Economic Research.
    11. Ian Small, 1997. "The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services," Bank of England working papers 72, Bank of England.
    12. Dobrinsky, Rumen & Korosi, Gabor & Markov, Nikolay & Halpern, Laszlo, 2006. "Price markups and returns to scale in imperfect markets: Bulgaria and Hungary," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 92-110, March.
    13. Lewis, Vivien & Stevens, Arnoud, 2015. "Entry and markup dynamics in an estimated business cycle model," European Economic Review, Elsevier, vol. 74(C), pages 14-35.
    14. Henry Nieuwenhuijsen & Gerrit de Wit & Frank Hindriks, 2000. "Comparative advantages in estimating markups," Scales Research Reports H200003, EIM Business and Policy Research.
    15. Rosen Marinov, 2010. "Competitive Pressure in Transition: A Role for Trade and Competition Policies?," Journal of Industry, Competition and Trade, Springer, vol. 10(1), pages 1-31, March.
    16. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, June.
    17. Elena Podrecca, 2013. "Riforme del mercato dei prodotti e crescita della produttività. Teoria ed evidenza empirica," ECONOMIA E SOCIET REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 10-41.
    18. Schiantarelli, Fabio, 2005. "Product Market Regulation and Macroeconomic Performance: A Review of Cross Country Evidence," IZA Discussion Papers 1791, Institute of Labor Economics (IZA).
    19. Sergio Aquino de Souza, 2005. "Estimating Markups From Plant-Level Data," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 098, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    20. Mark Vancauteren & Bruno Henry de Frahan, 2011. "Trade Policy, Competition and Productivity: The Impact of EU Harmonization in the Dutch Food Processing Industry," De Economist, Springer, vol. 159(4), pages 483-509, December.

    More about this item

    Keywords

    single market program; price cost margins; UK; firm-level data;
    All these keywords.

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cai:reofsp:reof_073_0303. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire). General contact details of provider: https://www.cairn.info/revue-de-l-ofce.htm .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.