THE IMPACT OF EUROPEAN AND GLOBAL INTEGRATION ON THE MARK-UP OF PRICES OVER COSTS

Dawn Holland

National Institute Economic Review, 2009, vol. 208, issue 1, 118-128

Abstract: This paper develops a new approach for investigating the determinant of the mark-up of prices over costs. We estimate basic price equations around an expression for marginal cost that is derived from a cost minimisation problem, using a vector error correction approach to avoid endogeneity bias. Observed basic prices include the mark-up over marginal costs, and this mark-up is of interest to policymakers as an indicator of competition and ultimately as a determinant of the level of equilibrium employment. We look at the factors driving this mark-up, and in particular look at the role of EMU, as well as globalisation, the European Single Market and openness to trade and the introduction of the euro. We use a panel data set that includes both EMU and non-EMU members. The results indicate an important role for trade liberalisation in determining the mark-up, but openness itself and the introduction of the euro do not appear to have a significant role.

Keywords: Mark-up; EMU; globalisation; marginal cost (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Journal Article: The Impact of European and Global Integration on the Mark-up of Prices Over Costs (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:niesru:v:208:y:2009:i:1:p:118-128

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