Discussion Papers

No.931 A Nonparametric Production Approach to Markup Estimation

by Kuang-hui Chen, Yoshihiro Hashiguchi

March 2024


A nonparametric production approach is proposed to estimate markups, which involves nonparametric estimation of the output elasticity function using cost share information. This approach helps avoid identification problems related to production function estimation, and the empirical issues highlighted by Raval (2023) are addressed. It is possible that factors such as differences in adjustment costs between inputs contribute to the issue and our nonparametric method accounts for this to some extent.

Keywords: Markups, Production functions, Output elasticity
JEL classification: D22, D24, L11

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