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This paper examines how prices, markups, and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi-product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity-based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India's trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory-gate prices and that output tariff declines have the expected pro-competitive effects. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason for this incomplete cost pass-through to prices is that firms offset their reductions in marginal costs by raising markups. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms.

We study the gains from trade liberalization in models with monopolistic competition, firm-level heterogeneity, and variable markups. For a large class of demand functions used in the international macro and trade literature, we derive a parsimonious generalization of the welfare formula in Arkolakis et al. (2012). We then use both estimates from micro-level trade data and evidence regarding firm-level pass-through to quantify the implications of this new formula. Within the class of models that we consider, our main finding is that gains from trade liberalization predicted by models with variable markups are equal to, at best, and slightly lower than, at worst, those predicted by models with constant markups. In this sense, pro-competitive effects of trade are elusive.

This paper incorporates the variable elasticity of substitution preferences in the variety expansion model developed by Grossman and Helpman [(1991) Innovation and Growth in the Global Economy , MIT Press]. There exists a balanced growth path when the elasticity of substitution is constant with knowledge spillover. When the elasticity of substitution is variable and the knowledge spillover is sufficiently small, a unique and stable steady state exists. When the knowledge spillover is sufficiently large, the steady state is unique and unstable. When the size of the knowledge externality is moderate, multiple equilibria exist.

In this paper, I develop a simple model of heterogeneous exporters to a single destination. This model highlights how the response of producer markups to market-level changes in that destination are intrinsically tied to the induced reallocation of export sales to that destination. I discuss how additional assumptions on the shape of demand (originally advocated by Alfred Marshall as his second law of demand) generate specific predictions for the response of those markups and induced product reallocations to increases in market size and competition in a destination: markups fall and market shares are reallocated towards better performing products. Recent evidence on French multi-product exporters strongly confirms this prediction for market share reallocations. The predictions for the markup responses are also consistent with the findings of the large empirical literature on pricing to market and incomplete pass-through.

This paper measures the pass-through of trade costs into U.S. import prices by using actual data on duties/tariffs and freight-related costs. The key innovation is to decompose the indirect effects of trade costs (on prices) into the effects on markups, quality and productivity while measuring/interpreting the passthrough of trade costs into welfare. Robust to the consideratioa of variable versus constant markups, there is evidence for incomplete pass-through, mostly due to the negative indirect effects of trade costs on marginal costs, suggesting that lower trade costs are associated with imports that have higher marginal costs; markups are affected relatively less. When the effects of trade costs on marginal costs are further decomposed into their components, the positive contribution of quality dominates in all cases, followed by the negative effects of productivity, suggesting that lower trade costs are associated with higher-quality imports that have been produced with lower productivity.

We present a model of economic growth driven by horizontal innovation in which, unlike the existing literature, the final output sector employs a non-specified, non-CES, additive production function. Our motivation in conducting such analysis is based on the recognition that the use of a CES aggregate production function in the final output sector leads to the unrealistic conclusion that the gross markup of price over marginal costs set in the monopolistically-competitive intermediate sector is constant. We derive necessary and sufficient conditions for an equilibrium with perfect competition in the final output market to exist even in the presence of a non-CES technology. These conditions generalize the usual properties of the CES case. We also analyze the long-run relation between economic growth and variable markups.

This article studies a model of the distribution of income under bounded needs. Utility derived from any given is bounded from above and demand is therefore not isoelastic. On the other hand, introducing new varieties always increases utility. It is assumed that each variety is owned by a monopoly. Workers can specialise in material goods production or in the knowledge sector, which designs new varieties. As productivity increases, the economy moves from a 'Solovian zone' where wages increase with productivity, to a 'Marxian' zone where they paradoxically decline with productivity.

Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that firms with high import shares and high market shares have low exchange rate pass-through. We test and quantify the theoretical mechanism using Belgian firm-product-level data on imports and exports. Small nonimporting firms have nearly complete pass-through, while large import-intensive exporters have pass-through around 50 percent, with the marginal cost and markup channels contributing roughly equally.

Background The increasing hospitalization expenses for Gastric Cancer (GC) impose a notable economic burden on society. Although the Chinese government has implemented the Universal Zero Markup Drug Policy (UZMDP) to control the growth of hospitalization expenditures, costs have continued to rise. Identifying the factors influencing the hospitalization expenses of GC patients is crucial. This study aimed to analyze the trends and factors influencing hospitalization expenses of GC patients in Shanghai from 2014 to 2021. Methods Data were sourced from the Health Network of Shanghai Economic Information Center. We employed interrupted time series analysis (ITSA) to analyze the trends in various medical expenditures before and after the implementation of the UZMDP. The degree of association between various medical expenditures and hospitalization expenditures of GC patients was calculated by using the new grey relational analysis (GRA). Furthermore, multiple linear regression was employed to identify the influencing factors. Results A total of 23,335 participants were included in this study. The ITSA results showed an increasing trend in hospitalization expenses following the implementation of UZMDP. Drug expenses decreased immediately post-UZMDP, but subsequently began to rise over time. Post-UZMDP, the expenses of medical consumables, examination, and healthcare services all showed an upward trend. The new GRA indicated that the influencing factors of hospitalization expenses, in order of importance, were expenses for drugs, consumables, healthcare services, and examination. Multivariable linear regression analysis revealed that GC patients aged 60 or below incurred lower hospitalization expenses (Coefficient = -780.06, P  = 0.0398). However, factors associated with increased hospitalization expenses included longer length of stay (Coefficient = 1753.01, P  < 0.001), surgeries (Coefficient = 29,047.26, P  < 0.001), and hospitalization in the tertiary hospitals (Coefficient = 25,485.19, P  < 0.001) or secondary hospitals (Coefficient = 17,755.12, P  < 0.001). Conclusions Hospitalization expenses of GC patients in Shanghai have been rising annually from 2014 to 2021. Despite the implementation of the UZMDP, drug expenses remain a major factor in escalating hospitalization expenses. The hospitalization expenses of GC patients are significantly influenced by several factors, including the demographic characteristics of patients, the severity of diseases, and the levels of hospitals. These findings provide a basis for more effective management of the hospitalization expenses for GC patients.

Industry concentration measures calculated with Compustat data, which cover only the public firms in an industry, are poor proxies for actual industry concentration. These measures have correlations of only 13% with the corresponding U.S. Census measures, which are based on all public and private firms in an industry. Also, only when U.S. Census measures are used is there evidence consistent with theoretical predictions that moreconcentrated industries, which should be more oligopolistic, are populated by larger and fewer firms with higher price-cost margins. Further, the significant relations of Compustatbased industry concentration measures with the dependent variables of several important prior studies are not obtained when U.S. Census measures are used. One of the reasons for this occurrence is that Compustat-based measures proxy for industry decline. Overall, our results indicate that product markets research that uses Compustat-based industry concentration measures may lead to incorrect conclusions.