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Understanding Markups in the Open Economy

Beatriz de Blas () and Katheryn Russ ()

American Economic Journal: Macroeconomics, 2015, vol. 7, issue 2, 157-80

Abstract: This paper presents a new model of Bertrand competition between heterogeneous firms in the open economy where the macroeconomic distribution of markups responds to the degree of trade openness and the underlying level of technology in each trading partner. The model's simple closed-form distributions for markups and pricing yield predictions that coincide with a number of stylized facts from the empirical literature on markups, pass-through, and trade openness which previously could be illustrated only through numerical simulations. (JEL D43, F12, F41, L13)

JEL-codes: D43 F12 F41 L13 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mac.20120155
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Handle: RePEc:aea:aejmac:v:7:y:2015:i:2:p:157-80