Discussion Paper Details

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Title: Markups Across Space and Time

Author(s): Eric Anderson, Sérgio Rebelo and Arlene Wong

Publication Date: December 2020

Keyword(s): business cycles, Gross margins, Marginal costs and prices

Programme Area(s): Monetary Economics and Fluctuations

Abstract: In this paper, we provide direct evidence on the behavior of markups in the retail sector across space and time. Markups are measured using gross margins. We consider three levels of aggregation: the retail sector as a whole, the firm level, and the product level. We find that: (1) markups are relatively stable over time and mildly procyclical; (2) there is large regional dispersion in markups; (3) there is positive cross-sectional correlation between local income and local markups; and (4) differences in markups across regions are explained by differences in assortment within each goods category, not by deviations from uniform pricing. We propose an endogenous assortment model consistent with these facts.

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Bibliographic Reference

Anderson, E, Rebelo, S and Wong, A. 2020. 'Markups Across Space and Time'. London, Centre for Economic Policy Research.