Template-Type: ReDIF-Paper 1.0
Title: Markups for Consumers
Author-Name: Bernhard Ganglmair
Author-Email: b.ganglmair@gmail.com
Author-Name: Alexander Kann
Author-Email: alexander.kann@zew.de
Author-Name: Ilona Tsanko
Author-Email: ilona.tsanko@zew.de

Classification-JEL: D63, E31, K21, L11, L40
Keywords: COICOP, consumption weights, Germany, 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.

Note: 
Length: 31
Creation-Date: 2021-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp282
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2021_282