Sneha Agrawal (), Abhishek Gaurav () and Melinda Suveg ()
Sneha Agrawal: International Monetary Fund
Abhishek Gaurav: Princeton University
Melinda Suveg: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Abstract: In this paper, we study a new channel to explain firms’ price-setting behavior. We propose that uncertainty about factor prices has a positive effect on markups. We show theoretically that firms with higher shares of inputs with volatile prices set higher markups. We use the Bartik shift-share approach to empirically test whether firms that use more oil relative to other inputs set higher markups when oil prices are more volatile. Our estimates imply that a one standard deviation increase in oil price volatility leads to a 0.38 percent increase in the markup of firms with average oil exposure.
33 pages, November 16, 2021
Full text files
wp1418.pdf Full text
Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2022-09-03 21:00:00.