The Upward Bias of Markups Estimated from the Price-Based Methodology

Herve Boulhol

Annals of Economics and Statistics, 2008, issue 89, 131-156

Abstract: Previous studies have emphasized that Roeger's methodology generates too high markups. This feature is confirmed on the basis of the unrealistically low capital shares implied by the estimates herein. Theoretically, it is shown that the normalization choice, the slow adjustment of capital and the mismeasurement of capital expenditures, each produces an upward bias. Based on the empirical analysis, each of these three sources of overestimation is very likely to play a role.

Date: 2008
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Working Paper: The upward bias of markups estimated from the price-based methodology (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2008:i:89:p:131-156

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