EconPapers    
Economics at your fingertips  
 

Markup dynamics and financial frictions: The Spanish case

José Manuel Montero and Alberto Urtasun

International Review of Economics & Finance, 2021, vol. 71, issue C, 316-341

Abstract: In this paper, we estimate price markups on a panel of Spanish manufacturing firms for the period 2000–2012 ​at a 3-digit sectoral level. Our results reveal that there is no evidence of large market power in the industries considered; however, in around 60% of these industries average markups either increased or remained stable over the crisis (2008–2012), despite the sharp fall in economic activity. We examine whether this result is related to the extremely tight financial conditions faced by Spanish corporations during the crisis. In this setting, firms may try to boost current profits by increasing markups –and possibly foregoing market share– to cover their financial commitments and fund their operations. We find a positive association between our measure of financial pressure and the estimated change in average markups between 2000-2007 and 2008–2012. This result suggests that those manufacturing industries more exposed to financial shocks by the end of the expansionary period tended to experience a larger increase in markups over the crisis.

Keywords: Markups; Market power; Financial pressure; GMM estimator (search for similar items in EconPapers)
JEL-codes: C23 C26 D24 L11 L16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056020301751
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:316-341

DOI: 10.1016/j.iref.2020.08.006

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-23
Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:316-341