OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

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The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures

In this paper, we present estimates of the mark-up of product price over marginal costs for the US manufacturing industries over the 1970-1992 period. The paper extends the analysis used in previous studies based on nominal productivity residuals by considering intermediate inputs and cyclical fluctuations of price margins. The estimated steady-state mark-ups are positive but moderate, generally in the range of 10-20 per cent. The results also support the hypothesis of countercyclical price margins in most manufacturing industries, especially in the presence of downward rigidities of labour inputs. This offers an appealing interpretation of the otherwise puzzling procyclicality of real wages and enables to better estimate TFP. We also discuss the role of market structures on the levels and cyclicality of mark-ups. Finally, we compare the results for the United States with those of the other G-5 countries and distinguish between fragmented and segmented industries. The latter ...


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