The Effects of the Pandemic on Market Power and Profitability

Juan Andres Espinosa-Torres and Jaime Ramirez-Cuellar
Authors registered in the RePEc Author Service: Juan Andrés Espinosa Torres

Papers from arXiv.org

Abstract: We explore firm-level markup and profit rates during the COVID-19 pandemic for a panel of 3,611 publicly traded firms in Compustat and find increases for the average firm. We offer conditions to give markups and profit rate forecasts a causal interpretation of what would have happened had the pandemic not happened. Our estimations suggest that had the pandemic not happened, markups would have been 4% and 7% higher than observed in 2020 and 2021, respectively, and profit rates would have been 2.1 and 6.4 percentage points lower. We perform a battery of tests to assess the robustness of our approach. We further show significant heterogeneity in the impact of the pandemic on firms by key firm characteristics and industry. We find that firms with lower than forecasted markups tend to have lower stock-exchange tenure and fewer employees.

Date: 2023-03
New Economics Papers: this item is included in nep-com, nep-hme, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2303.08765

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