Markups in U.S. and Japanese Manufacturing: A Short-Run Econometric Analysis

Catherine Morrison Paul

Journal of Business & Economic Statistics, 1992, vol. 10, issue 1, 51-63

Abstract: In this study a production theory model of firms' markup behavior is constructed based on variants of generalized Leontief cost and expenditure functions with adjustment costs and scale economies. Results from empirical implementation of this model for U.S. and Japanese manufacturing from 1960 through 1981 suggest that markups for both countries have increased over time, but their cyclicality varies due primarily to differential investment behavior. In addition, capacity utilization and especially scale economies tend to counteract the short run profit potential from markup behavior, so that markups measured ignoring these impacts may be biased downward. Finally, both supply and demand shocks appear to have a significant systematic impact on markups.

Date: 1992
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Working Paper: Markups in U.S. and Japanese Manufacturing: A Short Run Econometric Analysis (1988)
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