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Quarterly Journal of Economics Vol. 140 No. 4 2025

Bottom-Up Markup Fluctuations

Ariel T. Burstein1; Vasco M. Carvalho2; Basile Grassi3,4,5

1 University California, Los Angeles, and National Bureau of Economic Research , · 2 University of Cambridge and Center for Economic Policy and Research , · 3 Bocconi University and Innocenzo Gasparini Institute for Economic Research · 4 Observatoire Français des Conjonctures Économiques , · 5 Center for Economic Policy and Research ,

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Abstract

We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We first characterize how firm, sectoral, and aggregate markups comove with output at different levels of aggregation in response to firm-level shocks. We quantify the model’s ability to reproduce salient features of the cyclical properties of measured markups in French administrative firm-level data from the bottom (firm) level to the aggregate level. We document that (i) firm-level markups rise with market share and sector-level markups with concentration, (ii) the relationship between markups and sectoral output varies by firm size—negative for small firms but positive for large ones, (iii) sector-level markups move positively with sectoral output, and (iv) sectoral markups show no systematic relationship with aggregate output. Our model helps rationalize these seemingly conflicting patterns of markup cyclicality in the data.

DOI
10.1093/qje/qjaf029
Volume
140
Issue
4
Pages
2619-2684
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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