Evolution of Markups in the Manufacturing Industry of Turkiye

Eren Gürer () and Pınar Derin Güre ()
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Eren Gürer: Department of Economics, Middle East Technical University, Ankara, Turkey
Pınar Derin Güre: Department of Economics, Middle East Technical University, Ankara, Turkey

No 2401, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: In this study, we aim to estimate the labor markups along with the evolution of labor and profit shares in the manufacturing industry of Turkiye over 2007-2021 via an administrative firm-level dataset, Entrepreneurship Information System (EIS), covering the universe of firms and containing detailed balance sheet information. We employ the recently popularized technique, the production function approach developed by De Loecker and Warzynski (2012), to estimate markups. Until 2016, there is a general decline in the level of markups. Concurrently, the gross profit rate slightly increases, and labor share in value added remains relatively stable. However, since 2016, which corresponds to the era of high inflation, there has been a notable surge in gross profit rates alongside a significant decrease in the labor share. The primary catalyst for these post-2016 shifts is attributed to firms positioned in the upper percentiles of the markup distribution, which successfully increased their markups and their share in total value-added during this period. As such, it may be fruitful for the competition policy to delve deeper into the root causes of the post-2016 surge in the markups of the high markup firms as well as the changing market composition.

Keywords: markup; market power. profits (search for similar items in EconPapers)
JEL-codes: D22 D43 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2024-03, Revised 2024-03
New Economics Papers: this item is included in nep-ara, nep-com and nep-ent
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