The Pandemic Effects on Market Power and Profitability

41 Pages Posted: 27 May 2022

See all articles by Jaime Ramirez-Cuellar

Jaime Ramirez-Cuellar

Microsoft Research

Juan Andres Espinosa-Torres

University of Southern California, Department of Economics

Date Written: May 26, 2022

Abstract

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

Ramirez-Cuellar, Jaime and Espinosa-Torres, Juan Andres, The Pandemic Effects on Market Power and Profitability (May 26, 2022). Available at SSRN: https://ssrn.com/abstract=4120819 or http://dx.doi.org/10.2139/ssrn.4120819

Jaime Ramirez-Cuellar (Contact Author)

Microsoft Research ( email )

14820 NE 36th Street
Redmond, WA 98122
United States

Juan Andres Espinosa-Torres

University of Southern California, Department of Economics ( email )

Los Angeles, CA
United States

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