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Why Haven't Price-Cost Margins Decreased with Globalization?

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  • Hervé Boulhol

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This study analyzes the determinants of price-cost margins (PCMs) for OECD countries between 1970-2003. The main objective is to quantify the pro-competitive effect of international trade and understand why, despite trade liberalization, PCMs have not fallen overall. An increase of one percentage point in the import penetration ratio is estimated to lower the PCM by around 0,005: on average, imports contributed to a large decrease of 0,042 in the PCM. In addition, domestic product market deregulation has reduced PCMs. However, these effects are countervailed by the impacts of exports, financial deepening and disinflation. Union participation seems negatively related to PCMs.

Suggested Citation

  • Hervé Boulhol, 2006. "Why Haven't Price-Cost Margins Decreased with Globalization?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00084267, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00084267
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00084267
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    Cited by:

    1. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.
    2. Guilloux, S. & Kharroubi, E., 2008. "Some Preliminary Evidence on the Globalization-Inflation Nexus," Working papers 195, Banque de France.
    3. Bertoletti, Paolo & Fumagalli, Eileen & Poletti, Clara, 2017. "Price-cost margins and firm size under monopolistic competition: The case of IES preferences," Research in Economics, Elsevier, vol. 71(4), pages 653-662.

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