The Cyclical Behavior of Marginal Cost and Price

Mark Bils

American Economic Review, 1987, vol. 77, issue 5, 838-55

Abstract: The author examines the cyclical behavior of price/marginal cost margins for U.S. manufac turing after 1956. Short-run marginal cost is markedly procyclical. This is primarily due to procyclical overtime payments, incurred beca use employment is not perfectly flexible. In most industries, output price fails to respond to the cyclical movement in marginal cost; so price/marginal cost margins are markedly countercyclical. The res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing; they support theories that explain low production in a recession by the inability of firms to sell their output. Copyright 1987 by American Economic Association.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (332)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819871 ... O%3B2-D&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
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:aea:aecrev:v:77:y:1987:i:5:p:838-55

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().