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Industry Profit Margins and Concentration: Evidence from UK Manufacturing

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>1995
<mark>Journal</mark>International Review of Applied Economics
Issue number3
Volume9
Number of pages16
Pages (from-to)275-290
Publication statusPublished
Original languageEnglish

Abstract

This paper examines the determination of UK manufacturing industry profit margins using a panel of data from 1980 to 1991. In particular, we test whether industry concentration is important in shaping margins. Our results indicate that for both pooled cross-section data and for fixed effects models there is a robust positive correlation between industry margins and market concentration. However, the formulation of the margin matters for establishing this association. For those margins where a net revenue measure is used in the denominator of the margin then we are able to isolate the predicted relationship. However, for those margins that use gross revenue in the denominator the matter is more complex. Without controlling for a measure of material costs in the estimating equations then a simple concentration effect cannot be isolated.