Thursday, September 14, 2017

Nick Bunker — Markups, macroeconomics, and the changing U.S. economy

The two authors [Jan De Loecker of Princeton University and Jan Eeckhout of University College London] find a large increase in the average markup from 1980 to 2014—specifically an increase by a factor of 3.65. In 1980, the average markup was 18 percent and by 2014, the average was 67 percent. But interestingly, the increase is concentrated at the top of the markup distribution: The firm at the 90th percentile in 2014 had a markup of about 160 percent, compared to a markup of 40 percent for the 90th percentile firm in 1980. The markup at the median didn’t change much at all. In order to tie these increased markups with rising market power, the economists show how increases in markups are associated with higher profit levels, higher dividend payments, and a higher average market value—all of which would correspond to more market power in the economy....
Asymmetry in market power is increasing. This implies that economic rent is increasing.

2 comments:

Matt Franko said...

If you outsource your vendors to the turd world USD zombie nation slave factories and thus drop your vendor prices then the markup ratio is going to appear to increase...

NeilW said...

This is why we need to switch to managing prices via competition rather than unemployment.