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Journal of African Economies Advance Access originally published online on July 7, 2006
Journal of African Economies 2007 16(1):28-69; doi:10.1093/jae/ejl023
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Right arrow D43 - Oligopoly and Other Forms of Market Imperfection
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© The author 2006. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Mark-up Pricing in South African Industry

Johannes Fedderkea,*, Chandana Kularatneb and Martine Mariottic

a School of Economics, University of Cape Town
b South African National Treasury
c Department of Economics, University of California at Los Angeles

* Corresponding author: Johannes Fedderke, School of Economics, University of Cape Town, Private Bag, Rondebosch, 7701, South Africa; e-mail: jfedderk{at}commerce.uct.ac.za

This paper investigates the extent of the mark-up of the South African manufacturing sector, taking into account a number of characteristics of its component industries. We find significant mark-ups to be present in the South African manufacturing sector. In comparative terms, the mark-up is approximately twice that found for the US manufacturing sector. We find that industry concentration exerts a positive influence on the mark-up over marginal cost while an indicator of competitiveness suggests that an increase in an industry's competitiveness relative to other industries allows it to raise its mark-up. However, within-industry increases in competitiveness reduces the mark-up. We also analyse the impact of import and export penetration. Both import and export penetration serve to lower the mark-up. The impact of the business cycle on mark-up indicates that the mark-up is countercyclical. Finally, accounting for intermediate inputs significantly lowers the absolute size of the mark-up, controlling for the industry's concentration ratio. However, relative to findings on the US manufacturing industries, SA manufacturing mark-ups remain approximately twice as large.

JEL classification: L11 • L12 • L13 • L60 • D43


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