Market Structure and Cyclical Fluctuations in U.S. Manufacturing.

The relevance of imperfect competition for models of economic fluctuations has received increased attention from researchers in both macroeconomics and industrial organization. The authors outline a new methodology for estimating industry markups of price over marginal cost and the influence of market structure on cyclical movements in total factor productivity. Measures of industry concentration, import competition, and unionization are important for explaining markups in some industry groups. Much of the estimated markup of price over marginal cost is accounted for by noncapital fixed costs. Finally, the authors show that their estimated margins fluctuate substantially over the cycle. In particular, markups are countercyclical, especially in concentrated durable-goods industries. Copyright 1988 by MIT Press.