Working Paper: CEPR ID: DP15360
Authors: Ariel Tomas Burstein; Vasco Carvalho; Basile Grassi
Abstract: We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We characterize the comovement of firm, sectoral, and economy-wide markups with sectoral and aggregate output following firm-level shocks. We then quantify the model’s ability to reproduce salient features of the cyclical properties of markups in French administrative firm-level data, from the bottom (firm) level to the aggregate level. Our model helps rationalize various, seemingly conflicting, measures of markup cyclicality in the French data.
Keywords: markup cyclicality; oligopolistic competition; firm dynamics; granularity; aggregate fluctuations
JEL Codes: D21; D22; D24; E32; L11; D43; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm-level shocks (D22) | sectoral markups (L11) |
| firm-level shocks (D22) | aggregate markups (C43) |
| shocks to large firms (L20) | positive comovement between sectoral output and markups (L16) |
| shocks to small firms (D21) | negative comovement between sectoral output and markups (L16) |
| sectoral markups (L11) | aggregate markups (C43) |
| distribution of sector-level markups (D39) | aggregate markups (C43) |
| expenditure shares (E20) | aggregate markups (C43) |