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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 09-4:
Markups and Firm-Level Export Status

Jan De Locker () and Frederic Warzynski ()

Abstract: 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 firmsí 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; (follow links to similar papers)

JEL-Codes: A10; (follow links to similar papers)

40 pages, January 1, 2009

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