Markups and cost structure: Small Spanish firms during the Great Recession

Pilar García-Perea, Aitor Lacuesta and Pau Roldan-Blanco

Journal of Economic Behavior & Organization, 2021, vol. 192, issue C, 137-158

Abstract: A recent literature documents a secular increase in the sales-weighted average markup in the United States, a phenomenon that was driven by large and productive firms at the top of the profit distribution. Using rich administrative balance-sheet data, this paper documents the behaviour of markups in Spain before, during, and in the aftermath of the Great Recession. We show that markups rose during the financial crisis. Unlike in the U.S., these dynamics were driven by small and unproductive firms following an increase in their average costs due to a high and increasing share of fixed costs, especially overhead labour expenses. Despite the rise in markups, profit rates fell, especially amongst smaller firms.

Keywords: Markups; Market power; Average costs; Labour market; Firm size (search for similar items in EconPapers)
JEL-codes: D2 D4 E2 E3 J3 L1 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:192:y:2021:i:c:p:137-158

DOI: 10.1016/j.jebo.2021.10.001

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