Rising Markups or Changing Technology?

63 Pages Posted: 26 Sep 2022 Last revised: 25 Apr 2025

See all articles by Lucia Foster

Lucia Foster

U.S. Census Bureau - Center for Economic Studies

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Cody Tuttle

University of Texas at Austin

Date Written: September 2022

Abstract

Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor’s output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups’ patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing) and find patterns in support of changing technology as the driver of those differences.

Suggested Citation

Foster, Lucia and Haltiwanger, John C. and Tuttle, Cody, Rising Markups or Changing Technology? (September 2022). NBER Working Paper No. w30491, Available at SSRN: https://ssrn.com/abstract=4229114

Lucia Foster (Contact Author)

U.S. Census Bureau - Center for Economic Studies ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Cody Tuttle

University of Texas at Austin ( email )

2317 Speedway
Austin, TX Texas 78712
United States

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