Bottom-up Markup Fluctuations

Ariel Burstein, Vasco Carvalho and Basile Grassi

No 15360, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We first characterize how firm, sectoral, and aggregate markups comove with output at different levels of aggregation in response to firm-level shocks. We then quantify the model’s ability to reproduce salient features of the cyclical properties of measured markups in French administrative firm-level data from the bottom (firm) level to the aggregate level. We document that (i) firm-level markups rise with market share and sector-level markups with concentration, (ii) the relationship between markups and sectoral output varies by firm size—negative for small firms but positive for large ones, (iii) sector-level markups move positively with sectoral output, and (iv) sectoral markups show no systematic relationship with aggregate output. Our model helps rationalize these seemingly conflicting patterns of markup cyclicality in the data.

Keywords: Markup cyclicality; Oligopolistic competition; Firm dynamics; Granularity; Aggregate fluctuations (search for similar items in EconPapers)
JEL-codes: D21 D22 D24 D43 E32 L11 L13 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-bec, nep-com and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Related works:
Journal Article: Bottom-Up Markup Fluctuations* (2025)
Working Paper: Bottom-up Markup Fluctuations (2020)
Working Paper: Bottom-up Markup Fluctuations (2020)
Working Paper: Bottom-Up Markup Fluctuations (2019)
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