Markups in a Dual Labor Market: The Case of the Netherlands

Gerrit Hugo van Heuvelen, Leon Bettendorf and Gerdien Meijerink

No 44, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We follow the production function approach to assess markups, which requires the estimation of the output elasticity of a free input. In the basic setup we estimate a structural value added production function, using temporary contract hours as free input. We find rather stable markups in the Netherlands in the period 2006-2016. We show that extending the free variable incorrectly with fixed contract hours results in an increasing markup. Findings are robust to an alternative setup, in which a gross output function is specified and materials are used as free input. Implications for applied work and policy are discussed.

Date: 2020
New Economics Papers: this item is included in nep-iue
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Journal Article: Markups in a dual labour market: The case of the Netherlands (2021)
Working Paper: Markups in a dual labour market: the case of the Netherlands (2020)
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