The Levels and Cyclical Behaviour of Mark-Ups Across Countries and Market Structures

Organisation for Economic Co-operation & Development, Economics Department Working Paper No. 213

28 Pages Posted: 7 Oct 1999

See all articles by Joaquim Oliveira Martins

Joaquim Oliveira Martins

OECD; University Paris-Dauphine - PSL

Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs; IZA Institute of Labor Economics

Date Written: May 1999

Abstract

In this paper, we present estimates of the mark-up of product price over marginal costs for the manufacturing industries of the US and the other G-5 countries. The paper extends the analysis used in previous studies based on nominal productivity residuals by considering intermediate inputs and cyclical fluctuations of price margins. The estimated steady-state mark-ups are positive but moderate, generally in the range of 10-20 per cent, although with significant country differences. The results also support the hypothesis of countercyclical price margins in most manufacturing industries, especially in the presence of downward rigidities of labour inputs. This offers an appealing interpretation for the procyclicality of real wages and enables to better estimate TFP. Finally, we investigate the role of market structures on the levels and cyclicality of mark-ups. The distinction between fragmented and segmented industries provides a relatively robust evidence that the price-setting behaviour is indeed related to the type of market structures.

JEL Classification: D24, D40, L60

Suggested Citation

Oliveira Martins, Joaquim and Scarpetta, Stefano, The Levels and Cyclical Behaviour of Mark-Ups Across Countries and Market Structures (May 1999). Organisation for Economic Co-operation & Development, Economics Department Working Paper No. 213, Available at SSRN: https://ssrn.com/abstract=163775 or http://dx.doi.org/10.2139/ssrn.163775

Joaquim Oliveira Martins (Contact Author)

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University Paris-Dauphine - PSL ( email )

PARIS
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Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs ( email )

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France
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IZA Institute of Labor Economics

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