Understanding Markups in the Open Economy
American Economic Journal: Macroeconomics
vol. 7,
no. 2, April 2015
(pp. 157-80)
Abstract
This paper presents a new model of Bertrand competition between heterogeneous firms in the open economy where the macroeconomic distribution of markups responds to the degree of trade openness and the underlying level of technology in each trading partner. The model's simple closed-form distributions for markups and pricing yield predictions that coincide with a number of stylized facts from the empirical literature on markups, pass-through, and trade openness which previously could be illustrated only through numerical simulations. (JEL D43, F12, F41, L13)Citation
de Blas, Beatriz, and Katheryn N. Russ. 2015. "Understanding Markups in the Open Economy." American Economic Journal: Macroeconomics, 7 (2): 157-80. DOI: 10.1257/mac.20120155Additional Materials
JEL Classification
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- F12 Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F41 Open Economy Macroeconomics
- L13 Oligopoly and Other Imperfect Markets
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