Abstract
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.
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Rotemberg, J.J. (2018). Cyclical Markups. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2705
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2705
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Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
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