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Interpreting markups in Spanish manufacturing: the exponential model

  • Luis C. Corchón
  • Lourdes Moreno

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
Date of revision:
Handle: RePEc:cte:werepe:we1030
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  1. Lourdes Moreno & Diego Rodríguez, 2010. "Markups, bargaining power and offshoring: An empirical assessment," Working Papers 10-05, Asociación Española de Economía y Finanzas Internacionales.
  2. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  3. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2002. "The Effects of Privatization and Competitive Pressure on Firms?Price-cost Margins: Micro Evidence from Emerging Economies," LICOS Discussion Papers 12502, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  5. Jan De Loecker & Frederic Warzynski, 2009. "Markups and firm-level export status," NBER Working Papers 15198, National Bureau of Economic Research, Inc.
  6. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  7. Feenstra, Robert & Kee, Hiau Looi, 2008. "Export variety and country productivity: Estimating the monopolistic competition model with endogenous productivity," Journal of International Economics, Elsevier, vol. 74(2), pages 500-518, March.
  8. 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, vol. 103(2), pages 316-30, April.
  9. 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, vol. 54(4), pages 451-470, December.
  10. Ray, Debraj & Ueda, Kaoru, 1996. "Egalitarianism and Incentives," Journal of Economic Theory, Elsevier, vol. 71(2), pages 324-348, November.
  11. Konings, Jozef & Vandenbussche, Hylke, 2005. "Antidumping protection and markups of domestic firms," Journal of International Economics, Elsevier, vol. 65(1), pages 151-165, January.
  12. Eugenio J. Miravete & Lars-Hendrik Röller, 2004. "Estimating Price-Cost Markups Under Nonlinear Pricing Competition," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 526-535, 04/05.
  13. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  14. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  15. Lourdes Moreno Martin & Diego Rodriguez Rodriguez, 2010. "Export activity, persistence and mark-ups," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 475-488.
  16. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
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