This paper extends Hall's (1988) methodology to analyse imperfections in both the product and the labour market for firms in the Belgian manufacturing industry over the period 1988- 1995. We investigate the heterogeneity in price-cost mark-up and workers' bargaining power parameters among 18 sectors within the manufacturing industry as well as the relationship between both para meters. Using a sample of more than 7 000 firms, our GMM results indicate that ignoring imperfection in the labour market leads to an underestimation in the price -cost margin evaluated at perfect competition in the labour market. These findings are confirmed in the sectoral analysis. Sectors with higher workers' bargaining power typically show higher price-cost margins.
efficient bargaining bargaining power market power price -cost margins