Sectoral markups, factor substitution and factor-augmenting technical progress

Jaime Alonso-Carrera (), María Jesús Freire-Serén () and Xavier Raurich ()
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Jaime Alonso-Carrera: Universidade de Vigo
María Jesús Freire-Serén: Universidade de Vigo
Xavier Raurich: Universitat de Barcelona

No 2025/483, UB School of Economics Working Papers from University of Barcelona School of Economics

Abstract: We measure sectoral price markups, elasticities of substitution between capital and labor, and rates of factor-augmenting technical change in the United States from 1947 to 2010. Our approach utilizes the user cost of capital to decompose firms' operating surplus into capital payments and profits, enabling a direct computation of sectoral price markups. The results reveal that these markups are time-varying and exhibit a positive trend since 1980 in both manufacturing and services, mirroring the observed behavior of markups in the aggregate economy. Additionally, we estimate the elasticities of substitution and the rates of technical progress for each sector. We find that the estimated values of these technological parameters vary significantly depending on the assumption regarding the market structure of sectoral goods: perfect or imperfect competition.

Keywords: Price markups; sectoral productivity; elasticity of substitution; factor-augmenting technical change (search for similar items in EconPapers)
JEL-codes: O11 O41 O47 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2025
New Economics Papers: this item is included in nep-com, nep-inv and nep-lma
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