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The Determination of Profit Margins in UK Manufacturing

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>06/1991
<mark>Journal</mark>Journal of Industrial Economics
Issue number4
Volume39
Number of pages14
Pages (from-to)369-382
Publication statusPublished
Original languageEnglish

Abstract

This paper examines the determinants of profit margins in 91 U.K. manufacturing industries over the period 1983-86. It considers how the inclusion of labor market characteristics in empirical Industrial Organization specifications affects the estimated concentration-margins relationship. The empirical work pays detailed attention to the endogenous nature of variables derived from structural Industrial Organization models. The authors report instrumental variables estimates of margins equations in which there emerges a significant role for labor market characteristics. Indeed, both unionization and industrywide unemployment are found to depress profit margins. The impact of concentration is seen to be biased downward when these variables are omitted.