Markups and Firm-Level Export Status
40 Pages Posted: 23 Feb 2009 Last revised: 25 Feb 2009
Date Written: January 2009
We derive an estimating equation to estimate markups using the insight of Hall (1986) and the control function approach of Olley and Pakes (1996). We rely on our method to explore the relationship between markups and export behavior using plant-level data. We find significantly higher markups when we control for unobserved productivity shocks. Furthermore, we find significant higher markups for exporting firms and present new evidence on markup-export status dynamics. More specifically, we find that firms' markups significantly increase (decrease) after entering (exiting) export markets. We see these results as a first step in opening up the productivity-export black box, and provide a potential explanation for the big measured productivity premia for firms entering export markets.
Keywords: Markups, Control Function, Productivity, Exporting Behavior
JEL Classification: L1, F12
Suggested Citation: Suggested Citation