The upward bias of markups estimated from the price-based methodology

Hervé Boulhol ()
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Hervé Boulhol: TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, IXIS-CIB - Corporate Investment Bank

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Abstract: Previous studies have emphasized that Roeger's methodology generates too high markups. This feature is confirmed on the basis of the unrealistically low capital shares implied by the estimates herein. Theoretically, it is shown that the normalization choice, the slow adjustment of capital and the mismeasurement of capital expenditures, each produces an upward bias. For instance, the price-based estimated markup is in fact the markup adjusted for returns to scale on the variable inputs only. Based on the empirical analysis, each of these sources of overestimation is very likely to play a role.

Keywords: markup; capital fixity; imperfect competition; marge bénéficiaire; fixité du capital; concurrence imparfaite (search for similar items in EconPapers)
Date: 2005-09
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00195883
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Published in 2005

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