Markup Behavior in Durable and Nondurable Manufacturing: A production Theory Approach
Catherine Morrison Paul
No 2941, NBER Working Papers from National Bureau of Economic Research, Inc
In this paper I provide a production theory-based framework for measuring markups of price over marginal coat, and the effects of cost and demand characteristics on these markups. Price to marginal coat ratios are measured for various Canadian manufacturing industries, and the impacts of capacity utilization, scale economies, changing prices of variable inputs, import competition, unemployment and other cost and demand determinants are evaluated using adjusted markup indexes and elasticities of the markup ratios. The measured price margins are within a reasonable range and tend to be countercyclical. Moreover, these measures suggest that profitability stemming from the potential to increase price over marginal cost appears primarily to arise from cost characteristics determining scale economies.
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Published as Morrison, C. J. "The Cyclical Nature Of Markups In Canadian Manufacturing: A Production Theory Approach," Jouranl of Applied Econometrics, 1994, v9(3), 269-282.
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