The Effects of the Pandemic on Market Power and Profitability

56 Pages Posted: 27 May 2022 Last revised: 17 Mar 2023

Date Written: May 26, 2022


We explore firm-level markup and profit rates during the COVID-19 pandemic for a panel of 3,611 publicly traded firms in Compustat and find increases for the average firm. We offer conditions to give markups and profit rate forecasts a causal interpretation of what would have happened had the pandemic not happened. Our estimations suggest that had the pandemic not happened, markups would have been 4% and 7% higher than observed in 2020 and 2021, respectively, and profit rates would have been 2.1 and 6.4 percentage points lower. We perform a battery of tests to assess the robustness of our approach. We further show significant heterogeneity in the impact of the pandemic on firms by key firm characteristics and industry. We find that firms with lower than forecasted markups tend to have lower stock-exchange tenure and fewer employees.

Keywords: COVID-19, markups, profitability, firm dynamics, market power

JEL Classification: D22, D43, E3, L1

Suggested Citation

Espinosa-Torres, Juan Andres and Ramirez-Cuellar, Jaime, The Effects of the Pandemic on Market Power and Profitability (May 26, 2022). Available at SSRN: or

Juan Andres Espinosa-Torres

Analysis Group ( email )

333 South Hope Street, 27th Floor
Los Angeles, CA 90071
United States
2027901513 (Phone)

HOME PAGE: http://

Jaime Ramirez-Cuellar (Contact Author)

Microsoft ( email )

14820 NE 36th Street
Redmond, WA 98122
United States

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