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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.

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  • Hervé Boulhol, 2006. "Why Haven't Price-Cost Margins Decreased with Globalization?," Post-Print halshs-00084267, HAL.
    • Handle: RePEc:hal:journl:halshs-00084267
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00084267
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    References listed on IDEAS

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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. 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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    Keywords

    Price-cost margin; pro-competitive effect; wage bargaining; dynamic panel; Marges prix-coût; effet pro-concurrentiel; négociations salariales; panel dynamique;
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