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American Economic Review: Vol. 102 No. 6 (October 2012)

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Markups and Firm-Level Export Status

Article Citation

De Loecker, Jan, and Frederic Warzynski. 2012. "Markups and Firm-Level Export Status." American Economic Review, 102(6): 2437-71.

DOI: 10.1257/aer.102.6.2437

Abstract

In this paper, we develop a method to estimate markups using plant-level production data. Our approach relies on cost-minimizing producers and the existence of at least one variable input of production. The suggested empirical framework relies on the estimation of a production function and provides estimates of plant-level markups without specifying how firms compete in the product market. We rely on our method to explore the relationship between markups and export behavior. We find that markups are estimated significantly higher when controlling for unobserved productivity; that exporters charge, on average, higher markups and that markups increase upon export entry. (JEL D22, D24, F14, L11, L60)

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Authors

De Loecker, Jan (Princeton U)
Warzynski, Frederic (Aarhus U)

JEL Classifications

D22: Firm Behavior: Empirical Analysis
D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
F14: Empirical Studies of Trade
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L60: Industry Studies: Manufacturing: General


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