Markups and Marginal Cost over the Firm Life

Klaus Adam, Tobias Renkin and Züllig, Gabriel

No 20805, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use data on firm-level prices and output to estimate the dynamics of markups, marginal cost and prices over the life-cycle of Danish manufacturing firms. Markups increase by 8 percentage points over the first 20 years of firms’ lives. This reflects a substantial decrease of marginal cost that is only partially passed on into prices. The increase in markups coincides with increased product turnover — both introductions and discontinuations — among young firms. We show that despite the strong age profile in markups, and an increasing average firm age due to declining entry, the direct effect of firm aging on recent markup trends is small. Our findings have implications for a number of other macroeconomic theories and trends.

JEL-codes: D22 E23 L11 L16 (search for similar items in EconPapers)
Date: 2025-11
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