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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

  • Dobbelaere, Sabien

    ()

    (VU University Amsterdam)

  • Mairesse, Jacques

    ()

    (CREST-INSEE)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1898.

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Length: 22 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1898
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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. 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 921-47, October.
  3. Jacques Mairesse & Zvi Griliches, 1988. "Heterogeneity in Panel Data: Are There Stable Production Functions?," NBER Working Papers 2619, National Bureau of Economic Research, Inc.
  4. 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.
  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. Bruno CRÉPON & Rozen DESPLATZ & Jacques MAIRESSE, 2005. "Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 583-610.
  7. Swamy, P A V B, 1970. "Efficient Inference in a Random Coefficient Regression Model," Econometrica, Econometric Society, vol. 38(2), pages 311-23, March.
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