Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan
David Atkin, Azam Chaudhry, Shamyla Chaudhry, Amit K. Khandelwal, Eric Verhoogen
American Economic Review · 2015 · Volume 105 · Issue 5
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.
Keywords
Firm Behavior: Empirical Analysis, Production, Cost, Capital, Total Factor, and Multifactor Productivity, Capacity, Pricing, and Market Structure, Size Distribution of Firms, Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods, Household Goods, Sports Equipment, Industrialization, Manufacturing and Service Industries, Choice of Technology
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