Customer Capital, Markup Cyclicality, and Amplification
This paper studies the importance of firm-level price markup dynamics for business cycle fluctuations. Using state-of-the-art IO techniques to measure the behavior of markups over the business cycle at the firm level, I find that markups are countercyclical with an average elasticity of -1.1 with respect to real GDP. Importantly, I find substantial heterogeneity in markup cyclicality across firms, with small firms having significantly more counter-cyclical markups than large firms. Then, I develop a general equilibrium model by embedding customer capital (due to deep habits as in Ravn, ...
Markup Cyclicality: A Tale of Two Models
Many models in the business cycle literature generate counter-cyclical price markups. This paper examines if the prominent models in the literature are consistent with the empirical findings of micro-level markup behavior in Hong (2016). In particular, I test the markup behavior of the following two models: (i) an oligopolistic competition model, and (ii) a New Keynesian model with heterogeneous price stickiness. First, I explore the Atkeson and Burstein (2008) model of oligopolistic competition, in which markups are an increasing function of firm market shares. Coupled with an exogenous ...
Startups Account for Smaller Share of U.S. Jobs
Since 1994, startup firms have seen their share of U.S. employment shrink.
The Impact of Automation on Inequality
Occupations with large employment and low income have a higher automation probability.
Trends in Startups’ Share of Jobs in the U.S. and Eighth District
Startups have been representing a smaller share of all jobs within the U.S. and Eighth District in recent years.
The Global Decline of the Natural Rate of Interest and Implications for Monetary Policy
A low natural rate of interest in normal times may call for unconventional policy in recessions.
Price Markups for Small and Large Firms Over the Business Cycle
In this essay, I measure markup behaviors at the firm level (as opposed to the aggregate level usually measured in the literature). I use firm-level data in manufacturing sectors of France from the Bureau van Dijk (BvD) Amadeus dataset. I focus on the manufacturing sector because it suits the estimation of production functions.
Firms’ Price-Markup Dynamics During the Great Recession
The customer capital model is consistent with Great Recession markup dynamics.
How Important Are Production Networks to the U.S. Economy?
As manufacturing grows more sophisticated, industries become more interconnected through production networks.
U.S. States Hit the Hardest by COVID-19 Have Lower Unemployment Risks
States with relatively more COVID-19 cases tend to have a workforce less likely to face unemployment.