Mark-Up Pricing in South African Industry

Posted: 17 Jun 2008

See all articles by Johannes W. Fedderke

Johannes W. Fedderke

University of the Witwatersrand - School of Economics and Business Sciences; University of Cape Town

Chandana Kularatne

University of Cape Town - Faculty of Commerce - School of Economics

Martine Mariotti

affiliation not provided to SSRN

Date Written: January 2007

Abstract

This paper investigates the extent of the mark-up of the South African manufacturing sector, taking into account a number of characteristics of its component industries. We find significant mark-ups to be present in the South African manufacturing sector. In comparative terms, the mark-up is approximately twice that found for the US manufacturing sector. We find that industry concentration exerts a positive influence on the mark-up over marginal cost while an indicator of competitiveness suggests that an increase in an industry's competitiveness relative to other industries allows it to raise its mark-up. However, within-industry increases in competitiveness reduces the mark-up. We also analyse the impact of import and export penetration. Both import and export penetration serve to lower the mark-up. The impact of the business cycle on mark-up indicates that the mark-up is countercyclical. Finally, accounting for intermediate inputs significantly lowers the absolute size of the mark-up, controlling for the industry's concentration ratio. However, relative to findings on the US manufacturing industries, SA manufacturing mark-ups remain approximately twice as large.

Keywords: L11, L12, L13, L60, D43

Suggested Citation

Fedderke, Johannes and Kularatne, Chandana and Mariotti, Martine, Mark-Up Pricing in South African Industry (January 2007). Journal of African Economies, Vol. 16, Issue 1, pp. 28-69, 2007, Available at SSRN: https://ssrn.com/abstract=1146854 or http://dx.doi.org/ejl023

Johannes Fedderke (Contact Author)

University of the Witwatersrand - School of Economics and Business Sciences ( email )

Private Bag 3
WITS 2050
South Africa
+27 11 717-8106 (Phone)

University of Cape Town ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Chandana Kularatne

University of Cape Town - Faculty of Commerce - School of Economics ( email )

Rondebosch
Cape Town, 7700
South Africa

Martine Mariotti

affiliation not provided to SSRN

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