Globalization and the markups of European firms

Békés, Gábor and Hornok, Cecília and Muraközy, Balázs (2016) Globalization and the markups of European firms. Műhelytanulmányok = Discussion Papers (MT-DP ). Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Budapest.

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Abstract

We use a unique cross - section survey of manufacturing firms from four European countries (France, Germany, Italy, Spain) linked with bal ance sheet data to study the relationship between key aspects of globalization and firm - level markups. The main results are: (i) Exporting is positively correlated with markups; (ii) Importing intermediate inputs and outsourcing are also positively correla ted with markups; (iii) Firms with affiliates have higher markups than other firms, while simply membership in a group or being foreign - owned seem to be less important; (iv) Perceived competition from low - cost markets is negatively correlated with markups; (v) Higher quality production and innovation, especially if it results in IP, has a strong positive relationship with markups; (vi) While these variables are correlated, they are significant in a joint model including all four groups, and `fully globalize d' firms tend to charge around 100% higher markups than non - globalized firms.

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