Markups for Consumers

Bernhard Ganglmair (), Kann Alexander () and Tsanko Ilona ()
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Kann Alexander: University of Mannheim and ZEW Mannheim, Mannheim, Germany
Tsanko Ilona: ZEW Mannheim, Mannheim, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2021, vol. 241, issue 5-6, 701-734

Abstract: A central motivating factor for studying price markups is their effect on consumer welfare. However, reported estimates of (firm-level) price markups in the literature often focus on industry or cross-country comparisons. These treat different industries equally rather than based on how relevant they are for consumers. We propose markup measures in which firm-level price markups are weighted according to consumption expenditures in the respective industries. Using a concordance table between consumption categories (otherwise used for the calculation of consumer price indices) and a firm’s industry classification, we report results for Germany for the years 2002 through 2016. We find that consumption-weighted price markups are higher and have increased faster than the conventionally reported revenue-weighted markups. We further show that consumption-weighted markups are highest for low-income households, highlighting the potential role of price markups as a contributing factor to changes in inequality in society.

Keywords: COICOP; consumption weights; Germany; inequality; price markups (search for similar items in EconPapers)
JEL-codes: D63 K21 L11 L40 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Markups for Consumers (2021)
Working Paper: Markups for consumers (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:241:y:2021:i:5-6:p:701-734:n:11

DOI: 10.1515/jbnst-2020-0059

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