Market Structure and Price-Cost Margins: An Analysis of the Canadian Manufacturing Sector.

Market Structure and Price-Cost Margins: An Analysis of the Canadian Manufacturing Sector. This paper reports the results of an econometric investigation of the relationship between industry price-cost margins and various elements of industry structure in a cross-section of forty-three three-digit Canadian manufacturing industries during the period 1965-9. Among the elements of industry structure which are included as independent variables are the rate of growth of demand, seller concentration, product differentiation, economies of scale, and the effective rate of tariff protection. The principal conclusion of the study is that, given the rate of growth of demand and the level of capital intensity, inter-industry differences in price-cost margins are significantly correlated with a variety of measures of seller concentration. A second concluson is that a given level of seller concentration exerts a significantly greater effect on price-cost margins in the consumer goods sector than in the producer goods sector. [ABSTRACT FROM AUTHOR]