Granular Markups and Inflation Surge: The Role of Managerial Incentives

Yuchen Chen, Juliana Salomao, Varun Sharma and Yicheng Wang

No 20577, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a novel methodology to estimate firm-specific markup premiums using highly granular product-level data that controls for common shocks, isolating the premium as a residual. We validate this measure by comparing it to existing accounting-based estimates and by showing that it exhibits expected correlations with firm size and market share. Unlike traditional approaches, our method can be applied to both public and private firms, enabling an analysis of how financial structure and managerial incentives influence pricing decisions. We find that financial structure matters: public firms systematically increase markups following an IPO. Moreover, during the 2021–2022 inflation surge, publicly listed firms expanded their margins by capitalizing on inflationary pressures—especially among firms with high retail ownership, large early-pandemic stock declines, and strong equity-based pay incentives.

Keywords: Markup (search for similar items in EconPapers)
JEL-codes: E31 G23 G32 (search for similar items in EconPapers)
Date: 2025-08
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