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Joint Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing

  • Dobbelaere, Sabien

    ()

    (Vrije Universiteit Amsterdam)

This paper extends Hall's (1988) methodology to analyse imperfections in both the product and the labour market for firms in the Belgian manufacturing industry over the period 1988-1995. We investigate the heterogeneity in price-cost mark-up and workers' bargaining power parameters among 18 sectors within the manufacturing industry as well as the relationship between both parameters. Using a sample of more than 7 000 firms, our GMM results indicate that ignoring imperfection in the labour market leads to an underestimation in the price-cost margin evaluated at perfect competition in the labour market. These findings are confirmed in the sectoral analysis. Sectors with higher workers' bargaining power typically show higher price-cost margins.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1466.

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Length: 33 pages
Date of creation: Jan 2005
Date of revision:
Publication status: published in: International Journal of Industrial Organization, 2004, 22(10): 1381-1398
Handle: RePEc:iza:izadps:dp1466
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