EconPapers    
Economics at your fingertips  
 

The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services

Ian Small

Bank of England working papers from Bank of England

Abstract: This paper uses industry and firm data to look at price cost mark-ups and firm profit margins in UK manufacturing and services. In particular it examines how they behave over the business cycle. It has two main findings. First, the estimated average mark-ups and the profit margin results both suggest that there is imperfect competition in manufacturing and services. Second, mark-ups are pro-cyclical, as are profit margins even after allowing for movements in their standard determinants. This suggests that price pressures may increase during recovery periods and decrease during recessions. One possible explanation for this is Kreps and Scheinkman's argument that the pro-cyclicality of capacity constraints means that firms move between Cournot and Bertrand competition over the cycle. The finding that mark-ups are pro- cyclical also raises doubts about macroeconomic models that assume that demand shocks may affect employment via counter-cyclical mark-ups.

Date: 1997-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.bankofengland.co.uk/archive/Documents/h ... papers/1997/wp72.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1997/wp72.pdf [301 Moved Permanently]--> https://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1997/wp72.pdf)

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:boe:boeewp:72

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().

 
Page updated 2025-06-17
Handle: RePEc:boe:boeewp:72