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Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan

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Two top researchers at the Lahore School of Economics have just published an article in the top economics journal in the world. Dr. Azam Chaudhry and Professor Shamyla Chaudry have just published an article entitled “Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan,” in the prestigious American Economic Review (May 2015) along with coauthors David Atkin (UCLA), Amit Khandelwal (Columbia University) and Eric Verhoogen (Columbia University). The paper is the first from their world famous project on Sialkot soccer ball manufacturers and addresses the theoretical assumptions made by economists worldwide to estimate mark-ups. In this paper, the authors directly obtain mark-ups by surveying Pakistani soccer-ball producers. 

They document six important facts:
  1. Mark-ups are more dispersed than costs;
  2. Mark-ups and costs increase with firm size;
  3. The mark-up elasticity with respect to size exceeds the cost elasticity
  4. Costs increase with size because larger firms use higher-quality inputs
  5. Larger firms charge higher mark-ups because they have higher production shares of high-quality balls that carry higher mark-ups, and because they charge higher mark-ups conditional on ball type
  6. Correlations suggest marketing efforts are important for generating higher mark-ups.
This is one of the first times that Pakistani economists have published in top economics journals and shows that the Lahore School of Economics is at the forefront of global research. 

The paper can be accessed on the website of the American Economic Review here

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posted by S A J Shirazi @ Friday, June 05, 2015,


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