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Sectoral mark-up dynamics in Spain

Author

Listed:
  • Ángel Estrada

    (Banco de España)

  • David López-Salido

    (Banco de España)

Abstract

In this paper we show that value added mark ups tend to be pro cyclical in manufacturing and counter cyclical in market services. However, at the sectoral level value added mark ups may be misinterpreted if intermediate input variations are ignored. This is particularly true in the case of the manufacturing sectors, although less so in that of market services. In fact, this is the main explanation for the (pro cyclical) behaviour of relative services manufacturing mark ups which, in turn, play an important role in their relative price dynamics of these sectors. In addition, fluctuations in demand also play a role. In the case of services, mark ups depend negatively on current output and positively on future output; hence in periods when demand is recovering (declining) mark ups widen (narrow). By contrast, in the manufacturing sectors mark ups depend positively on the current output gap and negatively on future expected demand, i.e. when demand is recovering (declining) current mark ups fall (rise).

Suggested Citation

  • Ángel Estrada & David López-Salido, 2005. "Sectoral mark-up dynamics in Spain," Working Papers 0503, Banco de España.
    • Handle: RePEc:bde:wpaper:0503
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0503e.pdf
    File Function: First version, February 2005
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    References listed on IDEAS

    as
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    2. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2012. "Factor shares, the price markup, and the elasticity of substitution between capital and labor," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 181-198.
    3. Ana del Río & Garry Young, 2005. "The impact of unsecured debt on financial distress among British households," Working Papers 0512, Banco de España.
    4. Angel de la Fuente & Juan Francisco Jimeno, 2004. "The private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU," Working Papers 152, Barcelona Graduate School of Economics.
    5. Salvador Barrios & Gaetan Nicodeme & Antonio Jesus Sanchez Fuentes, 2014. "Effective Corporate Taxation, Tax Incidence and Tax Reforms: Evidence from OECD Countries," Taxation Papers 45, Directorate General Taxation and Customs Union, European Commission.
    6. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España.
    7. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    8. Arce, Oscar & López-Salido, J David, 2006. "House Prices, Rents and Interest Rates Under Collateral Constraints," CEPR Discussion Papers 5689, C.E.P.R. Discussion Papers.
    9. Álvarez, Luis J. & Burriel, Pablo & Hernando, Ignacio, 2005. "Do decreasing hazard functions for price changes make any sense?," Working Paper Series 461, European Central Bank.
    10. Hernández de Cos, Pablo & de Castro Fernández, Francisco, 2006. "The economic effects of exogenous fiscal shocks in Spain: a SVAR approach," Working Paper Series 647, European Central Bank.
    11. Luis J. Álvarez & Pablo Burriel & Ignacio Hernando, 2010. "Price-setting behaviour in Spain: evidence from micro PPI data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 105-121.
    12. Ana del Río & Garry Young, 2005. "The determinants of unsecured borrowing: evidence from the British household panel survey," Working Papers 0511, Banco de España.
    13. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Working Papers 0513, Banco de España.
    14. Paloma López-García & Sergio Puente, 2006. "Business demography in Spain: determinants of firm survival," Working Papers 0608, Banco de España.

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    More about this item

    Keywords

    sectoral mark-ups; gross output; aggregation; intermediate inputs;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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