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The Upward Bias of Markups Estimated from the Price-Based Methodology

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  • Hervé Boulhol

Abstract

Previous studies have emphasized that Roeger's methodology generates too high markups. This feature is confirmed on the basis of the unrealistically low capital shares implied by the estimates herein. Theoretically, it is shown that the normalization choice, the slow adjustment of capital and the mismeasurement of capital expenditures, each produces an upward bias. Based on the empirical analysis, each of these three sources of overestimation is very likely to play a role.

Suggested Citation

  • Hervé Boulhol, 2008. "The Upward Bias of Markups Estimated from the Price-Based Methodology," Annals of Economics and Statistics, GENES, issue 89, pages 131-156.
    • Handle: RePEc:adr:anecst:y:2008:i:89:p:131-156
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    Cited by:

    1. Christian Reiner & Christian Bellak, 2023. "Hat die ökonomische Macht von Unternehmen in Österreich zugenommen? Teil 2," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(2), pages 17-76.
    2. Flora Bellone & Patrick Musso & Lionel Nesta & Frédéric Warzynski, 2009. "L'effet pro-concurrentiel de l'intégration européenne. Une analyse de l'évolution des taux de marge dans les industries manufacturières françaises," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 139-163.
    3. Tom Holden, 2010. "Products, patents and productivity persistence: A DSGE model of endogenous growth," Economics Series Working Papers 512, University of Oxford, Department of Economics.
    4. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09hc03295hg is not listed on IDEAS
    5. Danny Leung, 2008. "Markups in Canada: Have They Changed and Why?," Staff Working Papers 08-7, Bank of Canada.
    6. Hervé Boulhol, 2008. "The Convergence of Price–cost Margins," Open Economies Review, Springer, vol. 19(2), pages 221-240, April.
    7. Ana Cristina Soares, 2020. "Price-cost margin and bargaining power in the European Union," Empirical Economics, Springer, vol. 59(5), pages 2093-2123, November.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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