Markups and Firm-Level Export Status

Abstract

for discussions on an earlier draft. We also thank three anonymous referees and the editor for comments and suggestions. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Exporting and Plant-Level Efficiency Gains: It's in the Measure

“…The methodology for deriving markups follows the production approach proposed by Hall (1986), recently revisited by De Loecker and Warzynski (2012). This approach computes markups without relying on market-level demand information.…”

Price Markups for Small and Large Firms Over the Business Cycle

“…However, the dataset provides neither the prices nor the marginal costs necessary for directly measuring markup. Instead, I follow insights from Hall (1986) and De Loecker and Warzynski (2012) firm's optimality condition of cost minimization with respect to a static input. Therefore, I use material inputs for markup estimations because materials do not suffer much from adjustment costs or other dynamic considerations.…”

FDI technology spillovers, geography, and spatial diffusion

“…This algorithm is commonly referred as "proxy variable approach" in the literature (Amit et al, 2008). We nevertheless do go beyond this conventional approach to incorporate some new developments in the literature, which are mainly drawn from Ackerberg et al (2006), Melitz andLevinsohn (2006) andDe Loecker andWarzynski (2012). Given that Levinsohn and Petrin (2003) (LP hereafter) algorithm has become a standard method in the literature and has been reintroduced in many studies, in the following we should focus on discussing the places in our procedure that have departed from conventional LP routine.…”

“…Instead of using Cobb-Douglas production function, we adopt a translog production function that includes all the (logged) inputs and their second order polynomial terms, i.e., (logged) inputs squared and interaction terms between all (logged) inputs. This departure avoids the assumptions of 1) perfect substitution between production factors; 2) constant output elasticity across firms and over time; and 3) perfect competition in the production factors market across firms and over time, which are all too restrictive to be valid in the empirical application (De Loecker and Warzynski, 2012 Source: Authors' calculation based on NBS-CIE database. FDI density is measured by fixed asset share of FDI in each county, i.e., the value of fixed asset of foreign firms divided by the total fixed asset in a county.…”

“…However, since firms are likely to produce goods that are differentiated, firm level prices will fluctuate relative to the industry price index and hence break the link between deflated sales and physical output. Both Van Beveren (2012) and De Loecker and Warzynski (2012) illustrate the potential bias in the process of production function estimation, and thus in productivity, if this problem is not addressed appropriately. Under some modest assumptions, Melitz and Levinsohn (2006) show that including a demand condition, (where, everything in logarithm,…”