Mark-ups, Industry Structure and the Business Cycle

Information on the primal and dual productivity measure is used to estimate industry mark-ups for 4-digit U.S. manufacturing industries. Investigating the relationship between these estimates and various industry characteristics as wel  as their cyclical movements, we find that mark-ups are significantly higher in concentrated and capital intensive industries with high growth rates and advertising to sales ratios. In contrast to previous research we do not find significant differences in mark-ups over the business cycle. We argue that the procyclicality of margins reported in earlier studies might be caused by the (false) assumption of identical average and marginal costs.

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