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Cross-Sectional Heterogeneity in Price-Cost Margins and the Extent of Rent Sharing at the Sector and Firm Level in France

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  • Dobbelaere, Sabien

    (Vrije Universiteit Amsterdam)

  • Mairesse, Jacques

    (CREST-INSEE)

Abstract

This paper studies cross-sectional heterogeneity in price-cost margins and the extent of rent sharing among 48 sectors and 10738 (mainly manufacturing) firms in France. At the sectoral level, the average price-cost mark-up and the average extent of rent sharing amount to 1.701 and 0.368 respectively. Ignoring the occurrence of rent sharing reduces the average price-cost mark-up to 1.500. At the firm level, the average parameters are estimated at 1.814 and 0.558 respectively. Using the Swamy (1970) methodology which corrects the observed heterogeneity for sampling heterogeneity, the corresponding estimates of their robust true dispersion are 0.694 and 0.204. Excluding the existence of rent sharing brings the firm-level average price-cost mark-up down to 1.491. The corresponding robust true dispersion amounts to 0.493.

Suggested Citation

  • Dobbelaere, Sabien & Mairesse, Jacques, 2005. "Cross-Sectional Heterogeneity in Price-Cost Margins and the Extent of Rent Sharing at the Sector and Firm Level in France," IZA Discussion Papers 1898, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1898
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    References listed on IDEAS

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    1. 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.
    2. Jacques Mairesse & Zvi Griliches, 1988. "Heterogeneity in Panel Data: Are There Stable Production Functions?," NBER Working Papers 2619, National Bureau of Economic Research, Inc.
    3. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research.
    4. 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.
    5. Bughin, Jacques, 1996. "Trade Unions and Firms' Product Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 289-307, September.
    6. Swamy, P A V B, 1970. "Efficient Inference in a Random Coefficient Regression Model," Econometrica, Econometric Society, vol. 38(2), pages 311-323, March.
    7. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
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    Cited by:

    1. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.
    2. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.
    3. Sina T. Ates & Felipe E. Saffie, 2013. "Project Heterogeneity and Growth: The Impact of Selection," PIER Working Paper Archive 13-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    4. Felipe Saffie & Sina Ates, 2016. "Project Heterogeneity and Growth: The Impact of Financial Selection on Firm Entry," 2016 Meeting Papers 1486, Society for Economic Dynamics.

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    More about this item

    Keywords

    rent sharing; price-cost margins;

    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

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