Markups for consumers


Ganglmair, Bernhard ; Kann, Alexander ; Tsanko, Ilona


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URL: https://madoc.bib.uni-mannheim.de/58395
URN: urn:nbn:de:bsz:180-madoc-583953
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-079
Place of publication: Mannheim
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSE (Economics)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
School of Law and Economics > VWL mit Schwerp. Innovation u. Wettbewerb (Ganglmair 2020-)
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D63 , E31 , K21 , L11 , L40,
Keywords (English): Germany , COICOP , consumption weights , inequality , price markups
Abstract: A central motivating factor for studying price markups is their effect on consumer welfare. Reported estimates of (firm-level) price markups in the literature, however, are often focused on industry or cross-country comparisons. These treat different industries equally rather than based on how relevant they are for consumers. We propose markup measures in which firm-level price markups are weighted according to consumption expenditures in the respective industries. Using a concordance table between consumption categories (otherwise used for the calculation of consumer price indices) and a firm’s industry classification, we report results for Germany for the years 2002 through 2016. We find that consumption-weighted price markups are higher than the conventionally reported revenue-weighted markups. We further show that consumption-weighted markups have increased faster, in particular for medium-income households, which highlights a potential role of price markup as a contributing factor to changes of inequality in society.

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