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Imperfect Competition and Business Cycles: An Empirical Investigation

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  • Lebow, David E

Abstract

Does imperfect competition increase the magnitude of business cycles? If so, the variability of an industry's employment and output should be positively related to the market power of firms in that industry. This paper demonstrates that the opposite is true: U.S. manufacturing industries with high price-cost margins display less employment variability than do low-markup industries. These high-markup industries display less price variability as well. Highly concentrated industries, however, do display more employment variability. To some degree, markups may reflect labor hoarding rather than market power; this may account for part, but not all, of the negative correlation between markups and variability. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Lebow, David E, 1992. "Imperfect Competition and Business Cycles: An Empirical Investigation," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 177-193, January.
  • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:1:p:177-93
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    Cited by:

    1. Amable, Bruno & Gatti, Donatella, 2000. "Is perfection optimal? Employment and product market competition," Discussion Papers, Research Unit: Economic Change and Employment FS I 00-304, WZB Berlin Social Science Center.
    2. Daniel Ryan, 2000. "Fluctuations in productivity growth rates and input utilization in U.S. manufacturing," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(2), pages 150-163, June.
    3. Hervani, Aref A., 2005. "Can oligopsony power be measured? The case of U.S. old newspapers market," Resources, Conservation & Recycling, Elsevier, vol. 44(4), pages 343-380.
    4. Amable, Bruno & Gatti, Donatella, 2001. "The Impact of Product Market Competition on Employment and Wages," IZA Discussion Papers 276, Institute of Labor Economics (IZA).

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