Working Paper: NBER ID: w27958
Authors: Ariel Burstein; Vasco M. 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 measured 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; granular macroeconomic model; oligopolistic competition
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large firm shocks (L20) | sectoral output (E23) |
| large firm shocks (L20) | markups (D43) |
| small firm shocks (L25) | sectoral output (E23) |
| small firm shocks (L25) | markups (D43) |
| firm-level markup cyclicality (D25) | sectoral markup changes (L16) |
| sectoral markups (L11) | sectoral output (E23) |
| markup cyclicality (E32) | aggregate markup response (E10) |
| size of firms (L25) | direction of markup cyclicality (E32) |