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A decomposition of price-cost margins in UK manufacturing

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  • Peter Lukacs

Abstract

The paper follows a methodology developed by Schmalensee to decompose the time varying behaviour of price-cost margins into an intra-industry and an inter-industry component. By doing so light can be shed on whether cyclical movements in industry price-cost margins reflect industry effects such as concentration or collusion or firm effects such as the performance of large versus small firms. Findings for the UK confirm Schmalensee's for the US in attributing most of the variance over time to size effects rather than industry effects but contrary to Schmalensee the size effect is positive in the sample not negative.

Suggested Citation

  • Peter Lukacs, 2000. "A decomposition of price-cost margins in UK manufacturing," Applied Economics Letters, Taylor & Francis Journals, vol. 7(10), pages 681-686.
    • Handle: RePEc:taf:apeclt:v:7:y:2000:i:10:p:681-686
    DOI: 10.1080/135048500416021
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    References listed on IDEAS

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    1. Schmalensee, Richard, 1989. "Intra-industry Profitability Differences in U.S. Manufacturing, 1953-1983," Journal of Industrial Economics, Wiley Blackwell, vol. 37(4), pages 337-357, June.
    2. Lukacs, Peter, 1997. "Input contracts, market structure and the empirical specification of price cost margins," Economics Letters, Elsevier, vol. 55(1), pages 139-143, August.
    3. Haskel, Jonathan & Martin, Christopher, 1994. "Capacity and Competition: Empirical Evidence on UK Panel Data," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 23-44, March.
    4. Conyon, M. & Machin, S., 1991. "Market structure and the empirical specification of profit margins," Economics Letters, Elsevier, vol. 35(2), pages 227-231, February.
    5. Haskel, Jonathan & Martin, Christopher, 1992. "Margins, concentration, unions and the business cycle : Theory and evidence for Britain," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 611-632, December.
    6. Peter Lukacs, 1999. "Vertical integration, input contracts and the margins - concentration relationship," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 631-640.
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    Cited by:

    1. Lockwood, Ben, 2003. "Imperfect competition, the marginal cost of public funds and public goods supply," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1719-1746, August.
    2. Arzu Akkoyunlu-Wigley & Sevinc Mihci, 2006. "Effects of the customs union with the European Union on the market structure and pricing behaviour of the Turkish manufacturing industry," Applied Economics, Taylor & Francis Journals, vol. 38(20), pages 2443-2452.
    3. Emanuel Barnea & Moshe Kim, 2007. "Interest rate margins: a decomposition of dynamic oligopolistic conduct and market fundamentals," Applied Financial Economics, Taylor & Francis Journals, vol. 17(6), pages 487-499.

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