ISBN:
9780444501578
Content:
Because inputs are scarce, marginal cost is an increasing function of output. Diminishing returns, costs of increasing employment as well as the increasing marginal disutility of working when hours worked and effort rise all contribute to make this function steep. Without changes in this function relating marginal cost to output, aggregate output can vary if and only if the markup of price to marginal cost (the inverse of real marginal cost for typical firms) varies. We first study whether, empirically, real marginal cost does rise in cyclical expansions. Average real labor cost is not very procyclical but, for several reasons, marginal labor cost is more procyclical than average labor cost. These include the presence of overhead labor and adjustment costs as well as differences between the marginal and the average wage. These corrections results in procyclical measures of real marginal cost. Measures of marginal costs based on materials costs and inventories also appear procyclical. We show that these procyclical movements in marginal cost may, depending on how costs are modeled, account for a substantial fraction of cyclical output movements. Finally, we survey models of variable markups. These include both models of sticky prices (in which markups vary because firms cannot all costlessly charge the markup they desire) and models in which firms' desired markup varies over time. This set of models allows a rich set of variables to affect output even if these variables do not shift the marginal cost schedule.
In:
Handbook of macroeconomics, Amsterdam [u.a.] : Elsevier, 1999, (1999), Seite 1051-1135, 9780444501578
In:
0444501568
In:
0444501584
In:
9780444501561
In:
9780444501585
In:
year:1999
In:
pages:1051-1135
Language:
English
DOI:
10.1016/S1574-0048(99)10024-7
URL:
Volltext
(Deutschlandweit zugänglich)
