Working Paper: CEPR ID: DP14114
Authors: Ulrich Doraszelski; Jordi Jaumandreu
Abstract: De Loecker & Warzynski’s (2012) method for recovering markups from cost-minimization conditions and estimated input elasticities yields either larger or smaller markups for exporters than for non-exporters depending on the input (labor or materials) employed. We point out two difficulties. First, under imperfect competition, an Olley & Pakes (1996) style estimator for input elasticities has to account for markups. Second, with commonly used specifications of the production function, the cost-minimization conditions do not match the variation in the data. We discuss how to address these difficulties. According to our estimates, the markups of exporters and non-exporters are essentially the same.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| markups (D43) | input elasticities (D12) |
| markups (D43) | unobservables (Y40) |
| input elasticities (D12) | biased estimates (C51) |
| productivity differences (O49) | markup differences (Y20) |
| export status (F10) | markups (D43) |