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Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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CompNet
CompNet - The Competitiveness Research Network The Competitiveness Research Network (CompNet) provides a forum for high level research and policy analysis in the areas of…
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Productivity: More with Less by Better Available resources are scarce. To sustain our society's income and living standards in a world with ecological and demographic change, we…
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MULTIMSPROD/MULTIMSPROD AUT
MULTIMSPROD/MULTIMSPROD AUT MULTIMSPROD = Enhancing the Micro Foundation of the Research Output of National Productivity Board (NPBs). Using CompNet and Expanding its Micro Data…
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IWH-CompNet Discussion Papers
IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research based on productivity data provided by the Competitiveness Research Network (CompNet) . The…
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Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Internships
Internship at Halle Institute for Economic Research (IWH) Interested in gaining an authentic insight in the interesting daily business and the variable tasks of an institute for…
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Do Larger Firms Exert More Market Power? Markups and Markdowns along the Size Distribution
Matthias Mertens, Bernardo Mottironi
IWH-CompNet Discussion Papers,
No. 1,
2023
Abstract
Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
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