Mexican manufacturing markups: procyclical behavior and the impact of trade liberalization
This paper estimates the markup for the Mexican manufacturing sector to detect the impact of trade liberalization on market power. Using Hall’s proposal that states that a procyclical Solow residual is an indication of market power, this research estimates the markup for different periods to detect the change in market power after trade liberalization was implemented. We account for the potential cyclical behavior of the markup by including procyclical variables that affect the markup. The data shows a markup that moves counter-cyclically. The evidence is consistent with theoretical arguments advanced by Rotemberg and Saloner (1986). We pool four-digit industries and obtain estimates of the markup for the whole manufacturing sector. For the entire manufacturing sector, we find that trade liberalization acts as a market disciplining device that reduces the degree of market power. At the sector level, we find a significant reduction in market power in those sectors that experienced a strong liberalization process after the GATT negotiations. Also, those sectors that show a reduction in market power after the NAFTA implementation, show a liberalization process in which protection is eliminated at a faster pace than the average for the whole economy.
Volume (Year): XII (2003)
Issue (Month): 2 (July-December)
|Contact details of provider:|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alejandro Castañeda Sabido, 1998. "Measuring the degree of collusive conduct in the Mexican manufacturing sector," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 13(2), pages 157-169.
- Nelson, C. & Startz, R., 1988.
"Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator,"
88-06, University of Washington, Department of Economics.
- Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-76, July.
- Nelson, C. & Startz, R., 1988. "Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator," Discussion Papers in Economics at the University of Washington 88-06, Department of Economics at the University of Washington.
- Charles R. Nelson & Richard Startz, 1988. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," NBER Technical Working Papers 0068, National Bureau of Economic Research, Inc.
- Hoekman, Bernard & Hiau Looi Kee & Olarreaga, Marcelo, 2001.
"Markups, entry regulation, and trade - Does country size matter?,"
Policy Research Working Paper Series
2662, The World Bank.
- Hoekman, Bernard & Kee, Hiau Looi & Olarreaga, Marcelo, 2001. "Mark-ups, Entry Regulation and Trade: Does Country Size Matter?," CEPR Discussion Papers 2853, C.E.P.R. Discussion Papers.
- Gordon H. Hanson & Ann Harrison, 1995.
"Trade, Technology, and Wage Inequality,"
NBER Working Papers
5110, National Bureau of Economic Research, Inc.
- Robert E. Hall, 1986.
"The Relation Between Price and Marginal Cost in U.S. Industry,"
NBER Working Papers
1785, National Bureau of Economic Research, Inc.
- 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 921-47, October.
- Carsten Kowalczyk & Donald R. Davis, 1998.
"Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA,"
in: The Regionalization of the World Economy, pages 227-258
National Bureau of Economic Research, Inc.
- Carsten Kowalczyk & Donald Davis, 1996. "Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA," NBER Working Papers 5421, National Bureau of Economic Research, Inc.
- Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 43-56, January.
- Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986.
"Market Structure and Cyclical Fluctuations in U.S. Manufacturing,"
NBER Working Papers
2115, National Bureau of Economic Research, Inc.
- Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
When requesting a correction, please mention this item's handle: RePEc:emc:ecomex:v:12:y:2003:i:2:p:209-230. 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: (Ricardo Tiscareño)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.