Rising Markups or Changing Technology? / Lucia S. Foster, John C. Haltiwanger, Cody Tuttle.

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Foster, Lucia S

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30491.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor's output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups' patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing), and we find patterns in support of changing technology as the driver of those differences.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30491 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w30489 Spatial Structural Change /	nber w3049 U.S. Tax Policy and Direct Investment Abroad /	nber w30490 The Racial Wealth Gap, Financial Aid, and College Access /	nber w30491 Rising Markups or Changing Technology? /	nber w30492 Labor Supply and Occupational Choice /	nber w30493 Estimating Perceptions of the Relative COVID Risk of Different Social-Distancing Behaviors from Respondents' Pairwise Assessments /	nber w30494 Multinationals and Structural Transformation /	Next

September 2022.

Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor's output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups' patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing), and we find patterns in support of changing technology as the driver of those differences.