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Sectoral markups, factor substitution and factor-augmenting technical progress

Author

Listed:
  • Jaime Alonso-Carrera

    (Universidade de Vigo)

  • María Jesús Freire-Serén

    (Universidade de Vigo)

  • Xavier Raurich

    (Universitat de Barcelona)

Abstract

We measure sectoral price markups, elasticities of substitution between capital and labor, and rates of factor-augmenting technical change in the United States from 1947 to 2010. Our approach utilizes the user cost of capital to decompose firms' operating surplus into capital payments and profits, enabling a direct computation of sectoral price markups. The results reveal that these markups are time-varying and exhibit a positive trend since 1980 in both manufacturing and services, mirroring the observed behavior of markups in the aggregate economy. Additionally, we estimate the elasticities of substitution and the rates of technical progress for each sector. We find that the estimated values of these technological parameters vary significantly depending on the assumption regarding the market structure of sectoral goods: perfect or imperfect competition.

Suggested Citation

  • Jaime Alonso-Carrera & María Jesús Freire-Serén & Xavier Raurich, 2025. "Sectoral markups, factor substitution and factor-augmenting technical progress," UB School of Economics Working Papers 2025/483, University of Barcelona School of Economics.
    • Handle: RePEc:ewp:wpaper:483web
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    File URL: https://hdl.handle.net/2445/224742
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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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