Stagnation of markups and (non-)existence of superstar firms in Japan

Recent studies show average firm markups increasing in america and other developed countries, driven by a little share of ‘superstar’ firms that have expanded their market shares and consolidated technological advantages. This column uses firm-level data showing that similar trends in markups are missing in Japan. Furthermore, intangible capital investments usually do not boost market power in the united states. Instead, a solid predictor of average markup in Japan is firm age, with older firms enjoying significantly higher market power.

Globalisation and the fall in markups in Poland

Michal Gradzewicz, Jakub Mućk , 17 September 2020

There’s been a lively debate regarding the dynamics of markups. This column plays a part in this debate by studying the partnership between globalisation and monopolistic markups in Poland. It highlights important non-linearities resulting in an uneven distribution of the consequences of global value chains for participating firms, with lowest benefits found for firms in the center of the production chain where goods are highly standardised and substitutable. In addition, it documents a fall in markups for Poland that can be explained by rising reliance on imported intermediates in export-oriented production and fiercer competition of domestic firms on export markets.

Explaining business cycle synchronisation using profits and the extensive margin

Francois de Soyres, Alexandre Gaillard , 21 September 2019

The recent upsurge in business cycle synchronisation is significantly connected with trade in intermediate inputs. That is a significant consequence of global value chains, but we can not understand it if we use a model where real GDP movements are simply just decomposed into changes in technology and factor supply. This column argues that accounting for profits and extensive margin adjustments reconciles theory and data and enriches our knowledge of why is countries interdependent, offering the first quantitative solution to the ‘trade co-movement puzzle’.

Global declining competition

Federico Diez, Jiayue Fan, Carolina Villegas-Sanchez , 02 August 2019

Studies of the evolution of market power since 2000 have focused mostly on publicly traded US firms. This column introduces a fresh global study that incorporates private firms, and decomposes the aggregate effect into intensive and extensive margins. It shows the upsurge in markup is broad-based across countries and sectors, but is driven by a small amount of firms. The markup increase is principally explained by increases in the common markup of incumbents, and reallocation effects towards new firms that gain market share from incumbents.

The customer margins of firms’ exports

Jerónimo Carballo, Gianmarco Ottaviano, Christian Volpe , 11 August 2013

The authors use highly disaggregated firm-level export data from Costa Rica, Ecuador, and Uruguay over the time 2005-08 to provide an accurate characterization of firms’ export margins, across products, destination countries, and crucially customers. They show a firm’s number of buyers and the distribution of sales across them systematically vary with the characteristics of its destination markets.

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