Markups and cost structure: Small Spanish firms during the Great Recession

A recent literature documents a secular increase in the sales-weighted average markup in the United States, a phenomenon that was driven by large and productive firms at the top of the profit distribution. Using rich administrative balance-sheet data, this paper documents the behaviour of markups in...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2021-12, Vol.192, p.137-158
Main Authors: García-Perea, Pilar, Lacuesta, Aitor, Roldan-Blanco, Pau
Format: Article
Language:English
Subjects:
Average costs
Firm size
Labour market
Market power
Markups
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Summary:A recent literature documents a secular increase in the sales-weighted average markup in the United States, a phenomenon that was driven by large and productive firms at the top of the profit distribution. Using rich administrative balance-sheet data, this paper documents the behaviour of markups in Spain before, during, and in the aftermath of the Great Recession. We show that markups rose during the financial crisis. Unlike in the U.S., these dynamics were driven by small and unproductive firms following an increase in their average costs due to a high and increasing share of fixed costs, especially overhead labour expenses. Despite the rise in markups, profit rates fell, especially amongst smaller firms.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2021.10.001