IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp1466.html
   My bibliography  Save this paper

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

Author

Listed:
  • Dobbelaere, Sabien

    () (Vrije Universiteit Amsterdam)

Abstract

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.

Suggested Citation

  • Dobbelaere, Sabien, 2005. "Joint Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing," IZA Discussion Papers 1466, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1466
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp1466.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Machin, Stephen & Stewart, Mark, 1996. "Trade Unions and Financial Performance," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 213-241, April.
    2. Chris Doucouliagos & Patrice Laroche, 2002. "Efficiency, productivity and employee relations in French equipment manufacturing," Cahiers du CEREFIGE 0203, CEREFIGE (Centre Europeen de Recherche en Economie Financiere et Gestion des Entreprises), Universite de Lorraine, revised 2002.
    3. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-337, April.
    4. Menezes-Filho, Naercio Aquino, 1997. "Unions and Profitability over the 1980s: Some Evidence on Union-Firm Bargaining in the United Kingdom," Economic Journal, Royal Economic Society, vol. 107(442), pages 651-670, May.
    5. Ulph, A. M. & Ulph, D. T., 1994. "Labour markets and innovation: Ex-post bargaining," European Economic Review, Elsevier, vol. 38(1), pages 195-210, January.
    6. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-378, June.
    7. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    8. Addison, John T & Belfield, Clive R, 2000. "The Impact of Financial Participation and Employee Involvement on Financial Performance: A Re-estimation Using the 1998 WERS," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(5), pages 571-583, November.
    9. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-361, July-Aug..
    10. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, vol. 70(5), pages 863-873, December.
    11. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 40-87, June.
    12. DeFina, Robert H, 1983. "Unions, Relative Wages, and Economic Efficiency," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 408-429, October.
    13. John H. Pencavel, 2004. "The Surprising Retreat of Union Britain," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 181-232 National Bureau of Economic Research, Inc.
    14. Stewart, Mark B, 1990. "Union Wage Differentials, Product Market Influences and the Division of Rents," Economic Journal, Royal Economic Society, vol. 100(403), pages 1122-1137, December.
    15. Barry T. Hirsch, 1991. "Labor Unions and the Economic Performance of Unions," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number luepf.
    16. Olaf H¸bler & Uwe Jirjahn, 2003. "Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 471-491, September.
    17. Denny, Kevin & Nickell, Stephen J, 1992. "Unions and Investment in British Industry," Economic Journal, Royal Economic Society, vol. 102(413), pages 874-887, July.
    18. Baldwin, Carliss Y, 1983. "Productivity and Labor Unions: An Application of the Theory of Self-Enforcing Contracts," The Journal of Business, University of Chicago Press, vol. 56(2), pages 155-185, April.
    19. Gregg, Paul & Machin, Stephen & Metcalf, David, 1993. "Signals and Cycles? Productivity Growth and Changes in Union Status in British Companies, 1984-9," Economic Journal, Royal Economic Society, vol. 103(419), pages 894-907, July.
    20. Freeman, Richard B, 1976. "Individual Mobility and Union Voice in the Labor Market," American Economic Review, American Economic Association, vol. 66(2), pages 361-368, May.
    21. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2001. "The dynamics of industrial mark-ups in two small open economies: does national competition policy matter?," International Journal of Industrial Organization, Elsevier, pages 841-859.
    22. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    23. Menezes-Filho, Naercio & Ulph, David & Van Reenen, John, 1998. "The determination of R&D: Empirical evidence on the role of unions," European Economic Review, Elsevier, vol. 42(3-5), pages 919-930, May.
    24. Ulph, Alistair & Ulph, David, 1998. "Labour markets, bargaining and innovation," European Economic Review, Elsevier, vol. 42(3-5), pages 931-939, May.
    25. Connolly, Robert A & Hirsch, Barry T & Hirschey, Mark, 1986. "Union Rent Seeking, Intangible Capital, and Market Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 567-577, November.
    26. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
    27. Bughin, Jacques, 1996. "Trade Unions and Firms' Product Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 289-307, September.
    28. Schroeter, John R, 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," The Review of Economics and Statistics, MIT Press, pages 158-162.
    29. Voos, Paula B & Mishel, Lawrence R, 1986. "The Union Impact on Profits: Evidence from Industry Price-Cost Margin Data," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 105-133, January.
    30. Richard B. Freeman & James L. Medoff, 1983. "Trade Unions and Productivity: Some New Evidence on an Old Issue," NBER Working Papers 1249, National Bureau of Economic Research, Inc.
    31. Maarten Goos & Jozef Konings, 2000. "Does Rent-Sharing Exist in Belgium? an Empirical Analysis Using Firm Level Data," Working Papers Department of Economics ces0019, KU Leuven, Faculty of Economics and Business, Department of Economics.
    32. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, March.
    33. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
    34. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
    35. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 227-251.
    36. McNabb, Robert & Whitfield, Keith, 1998. "The Impact of Financial Participation and Employee Involvement on Financial Performance," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(2), pages 171-187, May.
    37. Maarten Goos & Jozef Konings, 2001. "Does Rent-Sharing Exist in Belgium ?. An Empirical Analysis Using Firm Level Data," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 65-79.
    38. Rees, Albert, 1989. "The Economics of Trade Unions," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226707105.
    39. John T. Addison & Joachim Wagner, 1994. "UK Unionism and Innovative Activity: Some Cautionary Remarks on the Basis of a Simple Cross-country Test," British Journal of Industrial Relations, London School of Economics, vol. 32(1), pages 85-98, March.
    40. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
    41. Vandenbussche, Hylke & Veugelers, Reinhilde & Konings, Jozef, 2001. "Unionization and European Antidumping Protection," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 297-317, April.
    42. Bronars, Stephen G & Deere, Donald R, 1993. "Unionization, Incomplete Contracting, and Capital Investment," The Journal of Business, University of Chicago Press, vol. 66(1), pages 117-132, January.
    43. Tauman, Y & Weiss, Y, 1987. "Labor Unions and the Adoption of New Technology," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 477-501, October.
    44. Bruno Crépon & Rozen Desplatz & Jacques Mairesse, 2010. "Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms," NBER Chapters,in: Contributions in Memory of Zvi Griliches, pages 583-610 National Bureau of Economic Research, Inc.
    45. Ulph, Alistair & Ulph, David, 1988. " Bargaining Structures and Delay in Innovation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(4), pages 475-491.
    46. Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January.
    47. Richard B. Freeman, 1983. "Unionism, Price-Cost Margins, and the Return to Capital," NBER Working Papers 1164, National Bureau of Economic Research, Inc.
    48. Dobbelaere, Sabien, 2004. "Ownership, firm size and rent sharing in Bulgaria," Labour Economics, Elsevier, vol. 11(2), pages 165-189, April.
    49. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tyrowicz, Joanna, 2009. "When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession," MPRA Paper 15045, University Library of Munich, Germany.
    2. Fedderke, Johannes W. & Hill, Andrew J., 2011. "Industry structure and labor market flexibility in the South African manufacturing sector: A time series and panel data approach," Economic Modelling, Elsevier, vol. 28(3), pages 1291-1302, May.
    3. Dobbelaere, Sabien, 2004. "Estimation of price-cost margins and union bargaining power for Belgian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 22(10), pages 1381-1398, December.
    4. José Miguel Benavente & José Luis Contreras, 2006. "Margen de Utilidad y Distribución de las Rentas: La industria manofacturera chilena durante los noventas," Working Papers wp219, University of Chile, Department of Economics.
    5. Pal, Rupayan & Rathore, Udayan, 2016. "Estimating workers’ bargaining power and firms’ markup in India: Implications of reforms and labour regulations," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1118-1135.
    6. International Monetary Fund, 2006. "Belgium; Selected Issues," IMF Staff Country Reports 06/76, International Monetary Fund.
    7. D. Van den Poel, 2003. "Predicting Mail-Order Repeat Buying. Which Variables Matter?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(3), pages 371-404.
    8. Luis Folque, 2016. "Practical contribution for the assessment and monitoring of product market competition in the Portuguese Economy – estimation of price cost margins," GEE Papers 0063, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2016.
    9. Abdul Hakim & Arief Darmawan, 2016. "Minimum Wage Level from Female Workers Perspective: Yogyakarta City Case," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 6(4), pages 231-240, April.

    More about this item

    Keywords

    price-cost margins; market power; bargaining power; efficient bargaining;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1466. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.