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Firm and sectoral heterogeneity in markup variability

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  • Saara Tamminen
  • Han-Hsin Chang

Abstract

Many theoretical models assume that the markup of price over marginal costs is the same for all firms in a sector, irrespective of firm size, type, or efficiency. We analyze the distribution of markups for 70 Finnish sectors using a complete dataset, including both manufacturing and services sectors and firms of all sizes. In contrast to the constant markup hypothesis, we find (i) large differences in markups within sectors, (ii) higher markups for small firms and domestic firms, and (iii) greater markup heterogeneity in sectors with low capital-labour ratios and a large number of firms.

Suggested Citation

  • Saara Tamminen & Han-Hsin Chang, 2013. "Firm and sectoral heterogeneity in markup variability," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 157-178, February.
    • Handle: RePEc:taf:jitecd:v:22:y:2013:i:1:p:157-178
    DOI: 10.1080/09638199.2013.745289
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    References listed on IDEAS

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    1. Tamminen, Saara & Chang, Han-Hsin, 2012. "Company heterogeneity and mark-up variability," Working Papers 32, VATT Institute for Economic Research.
    2. Martin, Stephen, 2001. "Industrial Organization: A European Perspective," OUP Catalogue, Oxford University Press, number 9780198297284.
    3. John Sutton, 2001. "Technology and Market Structure: Theory and History," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262692643, December.
    4. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    2. Peter A.G. van Bergeijk & Charles van Marrewijk, 2013. "Heterogeneity and development: An agenda," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 1-10, February.
    3. Saara Tamminen, 2017. "Regional effects or none? Firms' profitability during the Great Recession in Finland," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 33-59, March.
    4. Tamminen, Saara, 2014. "Varying markups and income inequality in an open economy," Conference papers 332437, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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