Data and Markups: A Macro-Finance Perspective

Jan Eeckhout and Laura Veldkamp

No 30022, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What does market power look like in a data economy? We model data as fuel for prediction and study how it changes measured markups. Data has ambiguous effects on product markups: By reducing risk, it lowers markups. By prompting investment, it raises them. Its more distinctive effect is on aggregation. Better-informed firms shift production toward goods that have high realized profitability. This action-payoff covariance drives a wedge between product, firm, and industry markup measures. We show that this normalized covariance provides a lower bound on firms’ information. The calibrated model generates most of the observed level gap between cost-weighted and sales-weighted markups and can account for 82% of its 2010-2020 growth.

JEL-codes: D8 E3 L0 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mac and nep-reg
Note: AP CF EFG IO ME
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