The Price-Marginal Cost Markup and its Determinants in U.S. Manufacturing

Sandeep Mazumder

MPRA Paper from University Library of Munich, Germany

Abstract: This paper estimates the price-marginal cost markup for US manufacturing using a new methodology. Most existing techniques of estimating the markup are a variant on Hall's (1988) framework involving the manipulation of the Solow Residual. However this paper argues that this notion is based on the unreasonable assumption that labor can be costlessly adjusted at a fixed wage rate. By relaxing this assumption, we are able to derive a generalized markup index, which when estimated using manufacturing data is highly countercyclical and decreasing in trend since the 1960s. When we then seek to explain what causes the manufacturing markup to behave in this way, the most important determinant is the share of imported goods in the industry. Thus, increasing foreign competition in manufacturing has led to a decline in the industry's markup over time.

Keywords: Markup; Marginal Cost (search for similar items in EconPapers)
JEL-codes: D24 D40 E32 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-com and nep-mac
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/17260/1/MPRA_paper_17260.pdf original version (application/pdf)

Related works:
Journal Article: THE PRICE–MARGINAL COST MARKUP AND ITS DETERMINANTS IN U.S. MANUFACTURING (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17260

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).