Imperfect Competition and Business Cycles: An Empirical Investigation

David E Lebow

Economic Inquiry, 1992, vol. 30, issue 1, 177-93

Abstract: Does imperfect competition increase the magnitude of business cycles? If so, the variability of an industry's employment and output should be positively related to the market power of firms in that industry. This paper demonstrates that the opposite is true: U.S. manufacturing industries with high price-cost margins display less employment variability than do low-markup industries. These high-markup industries display less price variability as well. Highly concentrated industries, however, do display more employment variability. To some degree, markups may reflect labor hoarding rather than market power; this may account for part, but not all, of the negative correlation between markups and variability. Copyright 1992 by Oxford University Press.

Date: 1992
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