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Markup and the Business Cycle: Evidence from Italian Manufacturing Branches

Listed author(s):
  • Domenica J. Marchetti


    (Banca d'Italia)

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    This paper investigates the markup of price over marginal cost in Italian manufacturing branches. The approach used is an extension of Hall�s model that addresses some measurement shortcomings and theoretical limitations that may affect this class of model. The hypothesis of perfect competition is rejected in the majority of sectors over the period 1977-1995. Data on the cyclical behavior of the markup are found to vary significantly across branches, thereby helping to explain the contradictory evidence regarding the whole manufacturing sector reported in the literature. At sectoral level, industry concentration is found to be associated with anticyclical markups, as suggested by recent theoretical contributions. Finally, the size of the markup is negatively affected by both domestic and foreign competitive pressure.

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    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 362.

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    Date of creation: Dec 1999
    Handle: RePEc:bdi:wptemi:td_362_99
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