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The Scope of Variable Inputs and Markup Estimates

Author

Listed:
  • Shuichiro Nishioka

    (West Virginia University, Department of Economics)

  • Mari Tanaka

    (Hitotsubashi University)

Abstract

This paper builds an empirically tractable framework for the analysis of marginal costs in markup estimates from the production approach and examines how markups differ by the scope of variable inputs. Using plant-product matched data from Japan, we show that changes in markups can capture price and marginal cost dynamics, irrespective of the scope of variable inputs. Markups, however, are negatively and conditionally correlated with real output when only the most flexible intermediate inputs are selected as variable inputs. We find that the properties of markups depend on how variable inputs are selected and how underlying marginal costs are specified.

Suggested Citation

  • Shuichiro Nishioka & Mari Tanaka, 2022. "The Scope of Variable Inputs and Markup Estimates," Working Papers 23-01, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:23-01
    as

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    File URL: https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1065&context=econ_working-papers
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    More about this item

    Keywords

    Markups; Variable inputs; Marginal costs; Plant-product matched data; Japanese manufacturing;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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