Estimation of Price-Cost Margins and Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing

Posted: 27 Jul 2006

See all articles by Sabien Dobbelaere

Sabien Dobbelaere

Vrije Universiteit Amsterdam - Department of Economics; Tinbergen Institute; IZA Institute of Labor Economics

Abstract

This paper extends Hall's (1988) methodology to analyze imperfections in both the product and the labor market for firms in the Belgian manufacturing industry over the period 1988-1995. We investigate the heterogeneity in price-cost mark-up and workers' bargaining power parameters among 18 sectors within the manufacturing industry as well as the relationship between both parameters. Using a sample of more than 7,000 firms, our GMM results indicate that ignoring imperfection in the labor market leads to an underestimation of the price-cost margin evaluated at perfect competition in the labor market. These findings are confirmed in the sectoral analysis. Sectors with higher workers' bargaining power typically show higher price-cost margins.

Keywords: Efficient Bargaining, Workers' Bargaining Power, Market Power, Price-Cost Margins

JEL Classification: C23, D21, J50, L13

Suggested Citation

Dobbelaere, Sabien, Estimation of Price-Cost Margins and Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing. International Journal of Industrial Organization, Vol. 22, No. 10, pp. 1381-1398, December 2004. Available at SSRN: https://ssrn.com/abstract=920465

Sabien Dobbelaere (Contact Author)

Vrije Universiteit Amsterdam - Department of Economics ( email )

De Boelelaan 1105
NL- Amsterdam, NL-1081 HV
Netherlands
0031 20 598 28 74 (Phone)

Tinbergen Institute

Keizersgracht 482
NL- Amsterdam, NL-1017 EG
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
D- Bonn, 53072
Germany

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