Abstract

http://ssrn.com/abstract=2144037
 
 

References (18)



 


 



Constant versus Variable Markups: Implications for the Law of One Price


Hakan Yilmazkuday


Florida International University

April 12, 2016


Abstract:     
This paper compares the implications of having constant versus variable markups on the Law of One Price (LOP) by decomposing the good-category level prices into marginal costs of production, markups, and trade costs. Using a trade model, it is shown that the case of constant markups corresponds to log-linear trade regressions, while the case of variable markups corresponds to lin-log trade regressions. Empirical results show that marginal costs of production contribute most to the deviations from LOP for both cases of constant and variable markups; the decomposition of marginal costs further shows that destination-specific quality measures play the biggest role.

Number of Pages in PDF File: 34

Keywords: Functional Separability, Variable Markups, Trade Costs, Price Elasticity of Demand, Income Elasticity of Demand

JEL Classification: F12, F13, F14


Open PDF in Browser Download This Paper

Date posted: September 10, 2012 ; Last revised: April 12, 2016

Suggested Citation

Yilmazkuday, Hakan, Constant versus Variable Markups: Implications for the Law of One Price (April 12, 2016). Available at SSRN: http://ssrn.com/abstract=2144037 or http://dx.doi.org/10.2139/ssrn.2144037

Contact Information

Hakan Yilmazkuday (Contact Author)
Florida International University ( email )
11200 SW 8th Street
Miami, FL 33199
United States
Feedback to SSRN


Paper statistics
Abstract Views: 478
Downloads: 76
Download Rank: 231,032
References:  18

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.203 seconds