Domestic and Foreign Price-Marginal Cost Margins: An Application to Spanish Manufacturing Firms

Abstract

This paper investigates the differences in margins of export and domestic markets for Spanish manufacturing firms in the period 1990-1997. We estimate jointly a multiproduct cost function, a variable factor share equation and two price-marginal cost margin equations. The results obtained indicate that the marginal cost of production sold in export markets is slightly greater than in domestic markets. At the same time, the price-marginal cost margins in export markets are smaller than in domestic markets. We also find strong evidence that margins are procyclical in the domestic markets, but this evidence is less clear in the foreign markets.