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

Herve Boulhol

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

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 (search for similar items in EconPapers)
JEL-codes: L11 L13 L60 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Annales d'Économie et de Statistique, 89, 2008, pp. 131-156

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Journal Article: The Upward Bias of Markups Estimated from the Price-Based Methodology (2008)
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