Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors

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Abstract

This article provides estimates of price–marginal cost ratios or mark-ups for 50 sectors in eight Euro area countries and the US over the period 1981–2004. The estimates are obtained applying the methodology developed by Roger (J Polit Econ 103:316–330, 1995) on the EU KLEMS March 2007 database. Five stylized facts are derived. First, perfect competition can be rejected for almost all sectors in all countries; markup ratios are generally larger than 1. Second, average markups are heterogeneous across countries. Third, markups are heterogeneous across sectors, with services having higher markups on average than manufacturing. Fourth, services sectors generally have higher markups in the euro area than the US, whereas the pattern for manufacturing is the reverse. Fifth, there is no evidence that there is a broad range change in markups from the 1980s to the 1990s.

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Correspondence to Rebekka Christopoulou.

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A preliminary version of this article has been published as ECB Working Paper No 856. The opinions reflected in the article are entirely our own, they do not necessarily reflect those of the ECB. We thank Gabriel Fagan and Frank Smets for stimulating discussions and Paul Hiebert, Rolf Strauch, and three anonymous referees for comments. Any remaining errors are our own.

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Christopoulou, R., Vermeulen, P. Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors. Empir Econ 42, 53–77 (2012). https://doi.org/10.1007/s00181-010-0430-3

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Keywords

  • Price
  • Marginal cost
  • Markup

JEL Classification

  • D43
  • L11