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Mark-up Pricing in South African Industry

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  • Johannes Fedderke
  • Chandana Kularatne
  • Martine Mariotti

Abstract

This paper investigates the extent of the mark-up of the South African manufacturing sector, taking into account a number of characteristics of its component industries. We find significant mark-ups to be present in the South African manufacturing industry. In comparative terms, the mark-up is approximately twice that found for the US manufacturing sector. We find that industry concentration exerts a positive influence on the mark-up over marginal cost whilst an indicator of competitiveness suggests that an increase in an industry's competitiveness relative to other industries allows it to raise its mark-up. However, within-industry increases in competitiveness reduces the mark-up. We also analyze the impact of import and export penetration. Both import and export penetration serve to lower the mark-up. The impact of the business cycle on mark-up indicates that the mark-up is countercyclical. Finally, accounting for intermediate inputs significantly lowers the absolute size of the mark-up, controlling for the industry's concentration ratio. However, relative to findings on the US manufacturing sectors, SA manufacturing mark-ups remain approximately twice as large.

Suggested Citation

  • Johannes Fedderke & Chandana Kularatne & Martine Mariotti, 2005. "Mark-up Pricing in South African Industry," Working Papers 01, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:01
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