Price behaviour in the Italian manufacturing industry

This paper sets out to test the hypothesis that the price-cost margins of Italian manufacturing industries are influenced by excess domestic demand and by international prices of manufactured products. Using annual data (1956–1982) a mark-up equation is estimated for each of the twelve industries in which the manufacturing sector has been disaggregated. The ratio of industry price to average total cost is functionally related to the ratio of international price to domestic cost and a measure of excess demand. On the basis of the estimates, which are obtained by Maximum Likelihood techniques, and some specification tests, it is concluded that both factors influence pricing behaviour although their effect is not uniformly significant in every sector.