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Profit Determination In U.K. Manufacturing

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  • CONYON, M.
  • MACHIN, S.

Abstract

This paper examines the determinants of profitability in 90 U.K. manufacturing industries over the period 1983-86. It considers the importance of labour market characteristics in determining profits and how their inclusion in a profitability equation affects the concentration-margins relationship. the empirical work also pays detailed attention to the endogenous nature of variables derived from structural Industrial Organisation models and we report instrumental variables estimates of profitability equations in which there is a significant role for labour market characteristics. Indeed, both unionisation and unemployment are found to depress profit margins. The impact of concentration on profitability is seen to be biased downwards when these variables are not considered.

Suggested Citation

  • Conyon, M. & Machin, S., 1989. "Profit Determination In U.K. Manufacturing," The Warwick Economics Research Paper Series (TWERPS) 330, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:330
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