Economics at your fingertips  

How Costly Are Markups?

Chris Edmond, Virgiliu Midrigan and Daniel Yi Xu

Journal of Political Economy, 2023, vol. 131, issue 7, 1619 - 1675

Abstract: We study the welfare costs of markups in a dynamic model with heterogeneous firms and endogenous markups. We provide aggregation results summarizing the macro implications of micro-level markup heterogeneity. We calibrate our model to US Census of Manufactures data and find that the costs of markups can be large. We decompose the costs into three channels: an aggregate markup that acts like a uniform output tax, misallocation of factors of production, and inefficient entry. We find that the aggregate-markup and misallocation channels account for most of the costs of markups and that the entry channel is much less important.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link) (application/pdf) (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: How Costly Are Markups? (2018) Downloads
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:

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

Page updated 2024-06-12
Handle: RePEc:ucp:jpolec:doi:10.1086/722986