University of Hertfordshire

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Original languageEnglish
Pages (from-to)1-28
JournalJournal of Industry, Competition and Trade
Journal publication date9 Mar 2019
Early online date9 Mar 2019
DOIs
Publication statusE-pub ahead of print - 9 Mar 2019

Abstract

This paper investigates the pricing decisions across the manufacturing sectors of 19 EU countries over 1995–2014. The markup formulation of De Loecker and Warzynski (Am Econ Rev 102(6):2437–2471, 2012) is employed in order to estimate the price–cost margin of 10 2-digit NACE Rev.2 level manufacturing sectors and conclude whether the selling price of the final product exceeds the marginal cost of production. Subsequently, the pricing decisions of the constituent industries are tested with respect to (i) liquidity constraints, (ii) export orientation and (iii) the level of productivity when the factors of market regulation and industrial value are controlled for. A panel VAR framework is employed to take into account the presence of cross-section dependency and stationarity emerging in the panel sample. The findings suggest the presence of imperfect competitive conduct across every manufacturing industry through overpricing decisions. Moreover, higher markup ratios are charged by those sectors with access to credit, higher export orientation and higher levels of productivity.

Notes

© Springer Science+Business Media, LLC, part of Springer Nature 2019

ID: 16471123