The Pandemic Effects on Market Power and Profitability
41 Pages Posted: 27 May 2022
Date Written: May 26, 2022
We explore firm-level markup and profit rates during the COVID-19 pandemic for a panel of 3,548 publicly-traded firms in Compustat and find increases for the average firm. Those increases can be captured by previous trends in market power and profitability. Furthermore, focusing on the average firm masks large heterogeneity in the disruption caused by the pandemic. We complement our analysis by studying heterogeneity by pre-pandemic baseline markup rates, firm size, stock-exchange tenure, employment, profitability, and market share. We find that firms that have lower profitability than what we could expect from their previous trends tend to have lower markup rates, higher market shares, and more employees.
Keywords: COVID-19, markups, profitability, firm dynamics, market power
JEL Classification: D22, D43, E3, L1
Suggested Citation: Suggested Citation