Template-Type: ReDIF-Paper 1.0 
Title: Unravelling the Markups Changes: The Role of Demand Elasticity and Concentration
Author-Name: Michał Gradzewicz 
Author-Name: Jakub Mućk 
Abstract: We propose a framework allowing to identify sources changes in aggregatemarkups. Our approach derives from the conjectural variation theory and allowsto evaluate the role of price elasticity of demand as well as concentrationin shaping the markups. In the empirical part, we show that a decline inthe aggregate markups in Poland, showed by Gradzewicz and Mućk (2019),can be explained to a large extent by rising demand elasticity, while risingconcentration has mitigated this effect. We also document that at the industrylevel the globalization trends, e.g. international fragmentation, increasingstandardization and tighter integration with global economy, affect both demandelasticity and markups but in a theory-consistent, inverse way. Besides,we identify factors which are specific to demand elasticity (product varietiesand a home bias) and the markups (import content of exports).
Number: 2020-056
Length: 22 pages 
Creation-Date: 2020-11
Keywords: markups, price elasticity of demand, globalization
Classification-JEL: C23, D22, D4, F61, L11
File-URL: https://hdl.handle.net/20.500.12182/1110
File-Format: Application/pdf
DOI: 10.33119/kaewps2020056
Handle: RePEc:sgh:kaewps:2020056