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Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing

Listed author(s):
  • Roeger, Werner
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    It is well known that, under the assumptions of constant returns to scale, perfect competition, and the absence of factor hoarding, primal and dual productivity measures should be highly correlated. The apparent lack of correlation is usually attributed to fixed factors of production. In this paper, the author proposes an alternative explanation by relaxing the assumption of perfect competition. By controlling for the presence of a markup component, the author demonstrates that both productivity measures are in fact highly correlated for U.S. manufacturing. The analysis also provides an alternative method of estimating a markup of prices over marginal cost. Copyright 1995 by University of Chicago Press.

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    File URL: http://dx.doi.org/10.1086/261985
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    Article provided by University of Chicago Press in its journal Journal of Political Economy.

    Volume (Year): 103 (1995)
    Issue (Month): 2 (April)
    Pages: 316-330

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    Handle: RePEc:ucp:jpolec:v:103:y:1995:i:2:p:316-30
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    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Hulten, Charles R., 1986. "Productivity change, capacity utilization, and the sources of efficiency growth," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 31-50.
    3. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
    4. Michael Bruno, 1981. "Raw Materials, Profits, and the Productivity Slowdown (Rev)," NBER Working Papers 0660, National Bureau of Economic Research, Inc.
    5. Norrbin, Stefan C, 1993. "The Relation between Price and Marginal Cost in U.S. Industry: A Contradiction," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1149-1164, December.
    6. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
    7. Satyajit Chatterjee & Russell Cooper, 2014. "Entry And Exit, Product Variety, And The Business Cycle," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1466-1484, October.
    8. Bresnahan, Timothy F., 1981. "Departures from marginal-cost pricing in the American automobile industry : Estimates for 1977-1978," Journal of Econometrics, Elsevier, vol. 17(2), pages 201-227, November.
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