Changing Characteristic Of China’s Manufacturing Firms Marginal Cost-plus

With China’s rapid economic development, China’s manufacturing industry relative to other industries developed rapidly, and become the main source of growth in the national economy. In this regard, the fluctuations in the prices of manufactured goods has caused no small impact on inflation, the major factor deciding the price is marginal cost-plus. The marginal cost-plus reflect that prices deviate from marginal cost, and is the profit ratio of a unit cost basis, its size is often decided by the monopoly power of the firms. Firms’monopoly power depends mainly on the size of the market structure of the industry, the market structure will change constantly as macroeconomic cyclical operation, thus making that the price cost-plus magnitude of micro-enterprises is related to macroeconomic cyclical run closely. In addition, the magnitude of the firm price cost-plus directly reflect the level of the firm’s profitability, the overall level impact corporate investment decisions and are bound to affect household consumption and savings decisions by affecting income levels. Visible, understanding the changing regular of marginal cost-plus in the economic cycle will help to accurately grasp and understand the characteristics and mechanisms of price fluctuations in the economic cycle, and research on the enterprise microscopic pricing behavior also helps us to understand the microscopic mechanism of macroeconomic performance, has important significance.First of all, this article details cost-plus and give theoretical analysis about changing characteristics of price cost-plus. The main factors deciding the price cost-plus’s size is the monopoly power of the firm, this article deriving from the theoretical formula give that enterprise monopoly power is mainly influenced by corporate demand elasticity, the firms elasticity of demand is large, the firm monopoly power is weak; elasticity of demand is small, monopoly power is large. In this paper, by analyzing the three elements that affect elasticity of demand changes in the economic cycle, to analysis changes of the firm’s monopoly power in the economic cycle, and analyze the changing characteristics of firm’s cost-plus in the economic cycle. Theoretical analysis that, in the period of economic prosperity, the number of firms has increased, the competition between firms is fierce, firms’ elasticity of demand is large, so the monopoly power of the firm is small, marginal cost plus is small, in the period of economic recession, the number of firms decrease, the competition between firms become weakened, the elasticity of demand is small, then the monopoly power of the firm is small, the marginal cost plus is large. Firm’s marginal cost plus through theoretical analysis is counter-cyclical economic cycle.Second, by using monthly panel data of24manufacturing industries, to give empirical analysis of cost-plus’s changing characteristics in the economic cycle. The first by introducing cycle variables to build the required empirical model, based on the boom method, by selecting five consistent climate indicators of China’s industrial economy, and using principal component analysis composite climate index, with synthetic climate index instead of periodic variables. Then, by specification test of the model in the form seting, to determine this article using fixed effects varying coefficient models. Finally, the cost-plus of China’s manufacturing industry is counter-cyclical economic cycle showed through on empirical analysis, which show that the changes in China’s manufacturing enterprise product price pressures is opposite to the economic cycle, in economic recovery period price pressure reduce, in economic recession, price pressure increase.