Price-cost margins in Dutch manufacturing

Summary 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.Financial support from The Netherlands Organization for Scientific Research (NWO) is acknowledged. An earlier version of this paper was presented at the XVII-th Annual Conference of the European Association for Research in Industrial Economics (EARIE), Lisbon, 2–4 September 1990. We like to thank Rene den Hertog for computational assistance and Aad Kleijweg, Dan Kovenock, Keith Cowling, Kees Zeelenberg, David Audretsch, Sjaak Vollebregt, Jan van Dalen, Jeroen Potjes and two anonymous referees for helpful comments.