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Markups and fiscal policy: analytical framework and an empirical investigation

Author

Listed:
  • Georgios Christou

    (Athens University of Economics and Business (former))

  • Panagiotis Chronis

    (Bank of Greece)

Abstract

The paper focuses on the effects of fiscal policy on the industry-specific profit margin of a sector of an economy. This is a deviation from the existing literature, which focuses mainly on the effects of fiscal policy on the profit margin of the economy as a whole. In this work the price cost margin at the industry level is expressed as a function of the fiscal balance and other market variables such as industry share and price which are usually absent in a macro-analysis environment. Using a panel of ten European Union member countries for the period 1988-2005 we obtain the statistical results that support the existence of a non trivial relationship between price cost margin and fiscal policy, as it is expressed by the fiscal balance of a country. There are differences, however, between countries as well as industries reflecting different production and labor market conditions.

Suggested Citation

  • Georgios Christou & Panagiotis Chronis, 2017. "Markups and fiscal policy: analytical framework and an empirical investigation," Working Papers 221, Bank of Greece.
    • Handle: RePEc:bog:wpaper:221
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    fiscal balance; price cost margin; market share; manufacturing;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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