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Interpreting markups in Spanish manufacturing: the exponential model

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  • Luis C. Corchón
  • Lourdes Moreno

Abstract

In this paper we attempt to rationalize markups in a sample of Spanish manufacturing by assuming a representative consumer, profit-maximizing firms and constant returns to scale. We find that the standard forms of demand (CES and linear) do not provide a good explanation of markups. In contrast, a model where the representative consumer has an exponential utilty function yields results that match data more closely.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1030.

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Date of creation: Nov 2010
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Handle: RePEc:cte:werepe:we1030

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  1. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  2. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, American Economic Association, vol. 102(6), pages 2437-71, October.
  3. Konings, Jozef & Vandenbussche, Hylke, 2005. "Antidumping protection and markups of domestic firms," Journal of International Economics, Elsevier, Elsevier, vol. 65(1), pages 151-165, January.
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  7. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
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  9. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  10. Lourdes Moreno & Diego Rodríguez, 2010. "Markups, bargaining power and offshoring: An empirical assessment," Working Papers, Asociación Española de Economía y Finanzas Internacionales 10-05, Asociación Española de Economía y Finanzas Internacionales.
  11. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2003. "The Effect of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3703, C.E.P.R. Discussion Papers.
  12. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(2), pages 316-30, April.
  13. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  14. Dae-Wook Kim & Christopher R. Knittel, 2006. "BIASES IN STATIC OLIGOPOLY MODELS? EVIDENCE FROM THE CALIFORNIA ELECTRICITY MARKET -super-* ," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 54(4), pages 451-470, December.
  15. Eugenio J. Miravete & Lars-Hendrik Röller, 2004. "Estimating Price-Cost Markups Under Nonlinear Pricing Competition," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(2-3), pages 526-535, 04/05.
  16. Feenstra, Robert & Kee, Hiau Looi, 2008. "Export variety and country productivity: Estimating the monopolistic competition model with endogenous productivity," Journal of International Economics, Elsevier, Elsevier, vol. 74(2), pages 500-518, March.
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