Testing the Production Approach to Markup Estimation

Under the production approach to markup estimation, any exible input should recover the markup. I test this implication using manufacturing datasets from Chile, Colombia, India, Indonesia, the US, and Southern Europe, as well as store-level data from a major US retailer, and overwhelmingly reject that markups estimated using labor and materials have the same distribution. For every dataset, markups estimated using labor are negatively correlated with markups estimated using materials, exhibit greater dispersion, and have opposite time trends. I continue to find stark differences in markups estimated using energy and non-energy raw materials. Non-neutral pro-ductivity differences across firms can explain these findings.

• Publication year

  2020

• Venue

  Social Science Research Network

• Publication date

  2020-10-21

• Fields of study

  Mathematics, Economics

• Identifiers
  DOI 10.2139/SSRN.3324849
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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