Globalization and the fall of markups

Michał Gradzewicz and Jakub Mućk

No 304, NBP Working Papers from Narodowy Bank Polski

Abstract: This paper provides the evidence of a fall of markups of price over marginal costs in Poland over the last 15 years. Markups were calculated using a census of firms and the methodology proposed by De Loecker and Warzynski (2012). The fall of markups, by 18.6% for median and by 13.1% for weighted mean and experienced by 70% of firms, is robust to several empirical identification strategies. Moreover, the decline of markups is not related to changes in a sectoral composition and firms demography and is most severe in exporting firms. Our empirical results relate the fall of markups to globalization and emergence of the Global Value Chains. We show that the increasing reliance on imported components in production, together with rising concentration of domestic firms on export markets are the main factors behind the observed compression of markups. We also document a hump-shaped (U-shaped) relationship between foreign value added in exports (distance from final demand) and markups.

Keywords: markup; globalization; GVC; competition (search for similar items in EconPapers)
JEL-codes: C23 D22 D4 F61 L11 (search for similar items in EconPapers)
Pages: 46
Date: 2019
New Economics Papers: this item is included in nep-eur and nep-int
Note: The views expressed herein belong to the author and have not been endorsed by Narodowy Bank Polski. We would like to thank Jan Hagemejer, Marcin Kolasa and Joanna Tyrowicz; and seminar participants at Narodowy Bank Polski for helpful comments and discussions. Jakub Mućk thanks for financial support from the Foundation for Polish Science within the START fellowship.
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Citations: View citations in EconPapers (11)

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Journal Article: Globalisation and the fall of markups (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:304

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