Price-cost margins in Dutch manufacturing
Effects of concentration, business cycle and International Trade
The relation between price-cost margins and seller concentration and its development over the business cycle is investigated for Dutch manufacturing (1974-1986). We test the finding of Domowitz, Hubbard and Petersen (1986a and 1986b), that U.S. manufacturing (1958-1981) price-cost margins are more procyclical in more concentrated industries using a new data set. Considering business cycle measures at both industry and aggregated level, export share, level of competing imports and buyer concentration we find that (1) a business cycle upswing (downturn) leads to high (low) price-cost margins and (2) the test of more procyclical price-cost margins in more concentrated industries is inconclusive. Whether the finding of Domowitz, Hubbard and Petersen is supported depends on the business cycle measure used. Separate intertemporal and inter-industry estimates for most influences on price-cost margins are provided.