Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one...
See page
Mayer ref rec
Refereed Publications ...
See page
People
People Job Market Candidates Doctoral...
See page
Reports of the European Forecasting Network (EFN)
Reports of the European Forecasting Network (EFN) The European Forecasting...
See page
CompNet Database
The CompNet Competitiveness Database The Competitiveness Research Network (CompNet)...
See page
Müller ref
Selected Publications ...
See page
IWH-CompNet Discussion Papers
IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research...
See page
Speed Projects
Speed Projects On this page, you will find the IWH EXplore Speed Projects in...
See page
Alumni
IWH Alumni The IWH would like to stay in contact with its former employees. We...
See page
Do Larger Firms Exert More Market Power? Markups and Markdowns along the Size Distribution
Matthias Mertens, Bernardo Mottironi
IWH-CompNet Discussion Papers,
No. 1,
2023
Abstract
Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
Read article