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American Economic Review Vol. 105 No. 5 2015

Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan

David Atkin1; Azam Chaudhry2; Shamyla Chaudry2; Amit Khandelwal3; Eric Verhoogen4

1 Department of Economics, University of California-Los Angeles, 8283 Bunche Hall, 315 Portola Plaza, Los Angeles, CA 90095 (e-mail: ) · 2 Lahore School of Economics, Intersection Main Boulevard Phase VI DHA, Burki Road Lahore 53200, Pakistan (e-mail: ) · 3 Columbia Graduate School of Business, Columbia University, 3022 Broadway, Uris Hall 606, New York, NY 10027 (e-mail: ) · 4 Department of Economics and School of International and Public Affairs, Columbia University, 420 W. 118th St., Room 1022, MC 3308, New York, NY 10027 (e-mail: )

open access

Abstract

Researchers typically invoke theoretical assumptions to estimate mark-ups. Instead, we directly obtain mark-ups by surveying Pakistani soccer-ball producers. We document six facts: (i) Mark-ups are more dispersed than costs; (ii) Mark-ups and costs increase with firm size; (iii) The mark-up elasticity with respect to size exceeds the cost elasticity; (iv) Costs increase with size because larger firms use higher-quality inputs; (v) Larger firms charge higher mark-ups because they have higher production shares of high-quality balls that carry higher mark-ups, and because they charge higher mark-ups conditional on ball type; (vi) Correlations suggest marketing efforts are important for generating higher mark-ups.

DOI
10.1257/aer.p20151050
Volume
105
Issue
5
Pages
537-544
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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