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Abstract:
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This thesis studies the determinants of price-cost margins for U.S. manufacturing industries in the periods between 1967 and 1992 using SIC labeled industries and 1997-2002 using NAICS labeled industries. Aside from investigating the relationship between industry concentration and profit margins, which has a long history of empirical research, this thesis addresses demand-side determinants of price-cost margins using several interactive terms in the empirical model. This thesis differentiates itself from past research by looking at several measures of industry concentration. In addition to not controlling for panel effects, we also consider fixed and random effects versions of the two models used in this study. Our main findings are that the various industry concentration measures affect profit margins positively, and that generally, price-cost margins are pro-cyclical with respect to industry-specific demand changes, and counter-cyclical with respect to aggregate demand changes. |
