Are mark-ups rising?

In a new Stigler Center working paper, I) challenge this explanation by showing that public-firm market power has not substantially increased in recent decades. Using financial statement data from public firm filings and closely following De Loecker and Eeckhout (2017)’s methodology, I calculate markupsprices over marginal costs—for the universe of non-utility, non-financial US public firms. Aggregating these markup estimates to annual estimates, I find that public firm markups increased only modestly since the 1980s. Moreover, this increase is within historical variation—measured markups have increased from 1980-2010 as much as they have decreased from 1950-1980.

Why the disagreement? While De Loecker and Eeckhout (2017) use similar data sources and methods, I argue that they do not use the best accounting measure of variable cost.

Here is more from James Traina.  Via Harald Uhlig.


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