Markups and inflation: Evidence from firm-level data

Hassan Faryaar, Danny Leung and Alexandre Fortier-Labonté

Economic and Social Reports from Statistics Canada, Analytical Studies and Modelling Branch

Abstract: In the past two years, Canada has experienced inflation rates that have not been seen in the past two decades. The rise of markups, i.e., price over marginal cost, can be one of the potential drivers or amplifiers of inflation. This study uses firm-level data to estimate markups in Canada before and during the COVID-19 pandemic. The results indicate that aggregate markups for non-financial businesses, excluding oil and gas industries, increased by 2.6% from the two years before the onset of COVID-19 to the second quarter of 2022. Compared with a range of inflation measures during the same period, the estimated increase in markups is relatively small. For example, during the same period, consumer price inflation, excluding energy, rose by 10.5%.

Keywords: Markups; inflation; imperfect competition; COVID-19; supply and demand shocks (search for similar items in EconPapers)
JEL-codes: J23 M21 (search for similar items in EconPapers)
Date: 2023-06-28
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Persistent link: https://EconPapers.repec.org/RePEc:stc:stcp8e:202300600004e

DOI: 10.25318/36280001202300600004-eng

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