Markups and Firm-Level Export Status De Loecker, Jan; Warzynski, Frederic
The American economic review,
10/2012, Letnik:
102, Številka:
6
Journal Article
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In this paper, we develop a method to estimate markups using plantlevel production data. Our approach relies on cost-minimizing producers and the existence of at least one variable input of ...production. The suggested empirical framework relies on the estimation of a production function and provides estimates of plant-level markups without specifying how firms compete in the product market. We rely on our method to explore the relationship between markups and export behavior. We find that markups are estimated significantly higher when controlling f or unobserved productivity; that exporters charge, on average, higher markups and that markups increase upon export entry.
I use matched sampling techniques to analyze whether firms that start exporting become more productive, controlling for the self-selection into export markets. To this end, I use micro data of ...Slovenian manufacturing firms operating in the period 1994–2000. Overall I find that export entrants become more productive once they start exporting. The productivity gap between exporters and their domestic counterparts increases further over time. These results also hold at the industry level and are robust to other controls that may be associated with increased productivity, such as private ownership. Using information on the (firm-level) destination of exports, I find that the productivity gains are higher for firms exporting towards high income regions.
We measure the impact of a drastic new technology for producing steel—the minimill—on industry-wide productivity in the US steel industry, using unique plant-level data between 1963 and 2002. The ...sharp increase in the industry's productivity is linked to this new technology through two distinct mechanisms: (i) the mere displacement of the older technology (vertically integrated producers) was responsible for a third of the increase in the industry's productivity, and (ii) increased competition, due the minimill expansion, drove a productivity resurgence at the surviving vertical integrated producers and, consequently, the productivity of the industry as a whole.
Abstract
We document the evolution of market power based on firm-level data for the U.S. economy since 1955. We measure both markups and profitability. In 1980, aggregate markups start to rise from ...21% above marginal cost to 61% now. The increase is driven mainly by the upper tail of the markup distribution: the upper percentiles have increased sharply. Quite strikingly, the median is unchanged. In addition to the fattening upper tail of the markup distribution, there is reallocation of market share from low- to high-markup firms. This rise occurs mostly within industry. We also find an increase in the average profit rate from 1% to 8%. Although there is also an increase in overhead costs, the markup increase is in excess of overhead. We discuss the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the past four decades, most notably the declining labor and capital shares as well as the decrease in labor market dynamism.
Dynamic Inputs and Resource (Mis)Allocation Asker, John; Collard-Wexler, Allan; De Loecker, Jan
Journal of political economy,
10/2014, Letnik:
122, Številka:
5
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We investigate the role of dynamic production inputs and their associated adjustment costs in shaping the dispersion of static measures of capital misallocation within industries (and countries). ...Across nine data sets spanning 40 countries, we find that industries exhibiting greater time-series volatility of productivity have greater cross-sectional dispersion of the marginal revenue product of capital. We use a standard investment model with adjustment costs to show that variation in the volatility of productivity across these industries and economies can explain a large share (80–90 percent) of the cross-industry (and cross-country) variation in the dispersion of the marginal revenue product of capital.
This paper studies whether removing barriers to trade induces efficiency gains for producers. Like almost all empirical work which relies on a production function to recover productivity measures, I ...do not observe physical output at the firm level. Therefore, it is imperative to control for unobserved prices and demand shocks. I develop an empirical model that combines a demand system with a production function to generate estimates of productivity. I rely on my framework to identify the productivity effects from reduced trade protection in the Belgian textile market. This trade liberalization provides me with observed demand shifters that are used to separate out the associated price, scale, and productivity effects. Using a matched plant-product level data set and detailed quota data, I find that correcting for unobserved prices leads to substantially lower productivity gains. More specifically, abolishing all quota protections increases firm-level productivity by only 2 percent as opposed to 8 percent when relying on standard measures of productivity. My results beg for a serious réévaluation of a long list of empirical studies that document productivity responses to major industry shocks and, in particular, to opening up to trade. My findings imply the need to study the impact of changes in the operating environment on productivity together with market power and prices in one integrated framework. The suggested method and identification strategy are quite general and can be applied whenever it is important to distinguish between revenue productivity and physical productivity.
Firm Performance in a Global Market De Loecker, Jan; Goldberg, Pinelopi Koujianou
Annual review of economics,
01/2014, Letnik:
6, Številka:
1
Journal Article
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In this article, we introduce an empirical framework to analyze how firm performance is affected by increased globalization. Using this framework, we discuss recent work on measuring the impact of ...various shocks firms face in the global marketplace, such as reductions in trade costs (through lowering tariffs and abolishing quotas). Our analytical framework nests most empirical approaches to estimating the impact of trade and industrial policies on firms active in international markets. We identify outstanding issues surrounding the identification of the underlying mechanisms and conclude with suggestions for future research.
Recovering markups from production data De Loecker, Jan K
International journal of industrial organization,
05/2011, Letnik:
29, Številka:
3
Journal Article
Recenzirano
In this paper, I discuss, what I call, the Production-Approach to recovering markups. In contrast to the most popular approach in empirical IO, which relies on demand estimation, this approach ...requires standard production data while allowing for various price-setting models and puts no restrictions on underlying consumer demand. Using production data together with standard cost minimization allows a researcher to obtain markups in a flexible way. After presenting a brief and selective overview of the literature I contrast the production approach to that of the more popular demand estimation approach. This discussion makes it clear that both approaches face important trade-offs and at a minimum empirical economist should have both techniques as part of their toolbox. The hope is that the use of both methods will only depend on the data at hand and the relevant institutional knowledge, paired with the actual research question we are trying to answer.
We propose an approach to measuring the misallocation of production in a market that compares actual industry cost curves to undistorted (counterfactual) supply curves. As compared to traditional, ...TFPR-based, misallocation measures, this approach leverages cost data, such that results are readily mapped to welfare metrics. As an application, we analyze global crude oil extraction and quantify the extent of misallocation therein, together with the proportion attributable to market power. From 1970 to 2014, we find substantial misallocation, in the order of US$744 billion, 14.1 percent to 21.9 percent of which is attributable to market power.
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