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The Dynamics of Price Cost Margins: Evidence from UK Manufacturing

Author

Listed:
  • Holger Görg
  • Frédéric Warzynski

Abstract

This paper estimates the dynamics of price cost margins in UK manufacturing over the period 1989-1997 and links it to the implementation of the Single Market Program. Using the Hall-Roeger methodology, we find a dramatic decline in price cost margins by 25% after 1990. This suggests that firms anticipated the competitive shock induced by the Single Market Program, which created a more competitive environment. JEL Classification: F1, L1, L6.

Suggested Citation

  • Holger Görg & Frédéric Warzynski, 2006. "The Dynamics of Price Cost Margins: Evidence from UK Manufacturing," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 303-318.
    • Handle: RePEc:cai:reofsp:reof_073_0303
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    References listed on IDEAS

    as
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    9. repec:bla:jindec:v:47:y:1999:i:4:p:451-76 is not listed on IDEAS
    10. Haskel, Jonathan & Martin, Christopher & Small, Ian, 1995. "Price, Marginal Cost and the Business Cycle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 25-41, February.
    11. Ian Small, 1997. "The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services," Bank of England working papers 72, Bank of England.
    12. 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.
    13. Peter Diamond (ed.), 1990. "Growth / Productivity / Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041103, December.
    14. Machin, Stephen & Van Reenen, John, 1993. "Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 29-50, March.
    15. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135, Elsevier.
    16. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
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    Citations

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    Cited by:

    1. Flora Bellone & Patrick Musso & Lionel Nesta & Frédéric Warzynski, 2009. "L'effet pro-concurrentiel de l'intégration européenne. Une analyse de l'évolution des taux de marge dans les industries manufacturières françaises," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 139-163.
    2. Chrysovalantis Amountzias, 2018. "The Effects of Competition, Liquidity and Exports on Markups: Evidence from the UK Food and Beverages Sector," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 187-208, June.
    3. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09hc03295hg is not listed on IDEAS
    4. repec:spo:wpecon:info:hdl:2441/6153 is not listed on IDEAS
    5. Cohen, François & Glachant, Matthieu & Söderberg, Magnus, 2017. "Consumer myopia, imperfect competition and the energy efficiency gap: Evidence from the UK refrigerator market," European Economic Review, Elsevier, vol. 93(C), pages 1-23.
    6. Chrysovalantis Amountzias, 2024. "Market power and income disparities: How can firms influence the gap between capital and labor earnings," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 861-888, July.
    7. Rebekka Christopoulou & Philip Vermeulen, 2012. "Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors," Empirical Economics, Springer, vol. 42(1), pages 53-77, February.
    8. Ana Cristina Soares & João Amador, 2013. "Competition in the Portuguese Economy: Estimated Price-Cost Margins Under Imperfect Labour Markets," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    9. repec:hal:wpspec:info:hdl:2441/6153 is not listed on IDEAS
    10. Chrysovalantis Amountzias, 2021. "Markup cyclicality, competition and liquidity constraints: Evidence from a panel VAR analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3696-3718, July.
    11. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09hc03295hg is not listed on IDEAS
    12. Mingyi, Wang & Zhongyi, Zhang & Xiaoyu, Liu & Siwei, Xu, 2023. "Labor price distortion and export product markups: Evidence from China labor market," China Economic Review, Elsevier, vol. 77(C).
    13. repec:spo:wpmain:info:hdl:2441/6153 is not listed on IDEAS
    14. Chrysovalantis Amountzias, 2019. "Pricing Decisions and Competitive Conduct Across Manufacturing Sectors: Evidence from 19 European Union Manufacturing Industries," Journal of Industry, Competition and Trade, Springer, vol. 19(3), pages 413-440, September.
    15. repec:hal:spmain:info:hdl:2441/6153 is not listed on IDEAS

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    More about this item

    Keywords

    single market program; price cost margins; UK; firm-level data;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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