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We have the pleasure to announce Tove Karlsson (Stockholm School of Economics) as the next speaker in our CERNA Lunch Seminar series. The seminar will take place on Tuesday 08/03/2022 at 12:30 am in Salle Chevalier. The log-in information for the live stream on Zoom will also be provided in due course.
Tove will talk about:
Evaluating the Production Approach
to Estimate Markups
How reliable are markups estimated with the production approach? The production approach derives a measure of firm-level markups from the firm’s cost minimization problem, which can be estimated from financial data on firms. However, concerns have been raised about the distribution of estimated markups and their information content on true markups. This paper examines this concern empirically. While the distribution of true markups is notoriously hard to estimate, it is a stylized fact that markups are higher on more concentrated markets. Given this relationship between true markups and market structure, I test whether estimated markups are higher on more concentrated markets. Using panel data on the complete population of Swedish firms across four sectors, 251 local markets, and 20 years, I find that markup estimates generally follow the expected pattern. My results, thus, support the reliability of the production approach.