Mark-ups and Rent Sharing: The Case of Korean Manufacturing Firms

Kap-Young Jeong and Donghun Kim

Global Economic Review, 2012, vol. 41, issue 2, 131-145

Abstract: This article estimates firm mark-ups to evaluate market competition in Korean manufacturing industries for the period of 1982--2004 and analyzes how the mark-ups differ across industry sectors. For the manufacturing sector as a whole, our results lead us to reject the null hypothesis of a competitive market, although market imperfection varies across industry sectors. Meanwhile, the parameter for union bargaining power over firm profit was much smaller than those found in the previous studies and insignificant in some industry sectors. Our firm-level results indicate that intra-industry variation in mark-ups and returns to scale is greater than inter-industry variation as shown in the sector analysis. Also, we find that mark-ups respond counter-cyclically to aggregate demand shocks and that the magnitudes of responses differ from industry to industry.

Date: 2012
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DOI: 10.1080/1226508X.2012.684466

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