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| Author: | Bils, M. |
| Title: | The cyclical behavior of marginal cost and price |
| Journal: | American Economic Review
1987 : DEC, VOL. 77:5, p.838-855 |
| Index terms: | MANUFACTURING PRICES MARGINAL COSTING |
| Language: | eng |
| Abstract: | The cyclical behavior of price /marginal cost margins for US manufacturing is examined. Previous research is reviewed. An approach is presented to calculating marginal cost. The problem of estimating cyclical movements in marginal cost is reduced essentially to estimating the shape of the marginal wage üscedule. The wage policy of firms is modelled. Marginal cost is found to be very procyclical. The major cause is that employment is not perfectly flexible. The countercyclical movement of prices is explained. Results are compared with the perfectly competitive view of manufacturing. Imperfections in goods markets are discussed as factors playing a primary role in the cycle. |
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