The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Cyclical Markups

  • Julio J. Rotemberg
Reference work entry


This article first shows that countercyclical variations in the ratios of prices to marginal cost (markups) can cause pro-cyclical fluctuations in the demand for labour at a given real wage and thus induce fluctuations in economic activity that look like business cycles. It then discusses methods for measuring cyclical movements in markups and shows that several types of evidence suggest that these are counter-cyclical. Lastly, it discusses economic mechanisms that can explain these counter-cyclical markup movements.


Cobb–Douglas functions Cyclical markups Elasticity Imperfect competition Increasing returns Inventory investment Labour productivity Labour supply Leisure Limit pricing Real business cycles Sticky prices Wealth effects 

JEL Classification

D4 D10 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Julio J. Rotemberg
    • 1
  1. 1.