Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan
American Economic Review
vol. 105,
no. 5, May 2015
(pp. 537-44)
Abstract
Researchers typically invoke theoretical assumptions to estimate mark-ups. Instead, we directly obtain mark-ups by surveying Pakistani soccer-ball producers. We document six facts: (i) Mark-ups are more dispersed than costs; (ii) Mark-ups and costs increase with firm size; (iii) The mark-up elasticity with respect to size exceeds the cost elasticity; (iv) Costs increase with size because larger firms use higher-quality inputs; (v) Larger firms charge higher mark-ups because they have higher production shares of high-quality balls that carry higher mark-ups, and because they charge higher mark-ups conditional on ball type; (vi) Correlations suggest marketing efforts are important for generating higher mark-ups.Citation
Atkin, David, Azam Chaudhry, Shamyla Chaudhry, Amit K. Khandelwal, and Eric Verhoogen. 2015. "Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan." American Economic Review, 105 (5): 537-44. DOI: 10.1257/aer.p20151050Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L67 Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology