In our markup paper, “The Cyclical Behavior of the Price-Cost Markup,” we re-estimated our marginal change in overtime hours using microdata from my Londitudinal Population Databse (LPD). We still find that markups are procyclical or acyclical, both unconditionally and conditional on demand shocks.

In our industry paper, “Industry Evidence on the Effects of Government Spending,” we significantly updated the theory and discussion, explored other industry characteristics associated such as unionization and concentration, and added analysis of the dynamic interactions. We now discuss how the growth of government spending across industries is correlated with technology and show how accounting for this correlation is essential for constructing a proper instrument for government demand.

Copies of either paper can be downloaded from my research page.

You can download a copy of the paper from the link above or on my Research page.

Here is the abstract:

Countercyclical markups constitute the key transmission mechanism for monetary and other “demand” shocks in New Keynesian models. This paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost. The first part of the paper studies markups in the aggregate economy and the manufacturing sector. We use Bils’ (1987) insights for converting average cost to marginal cost, but do so with richer data. We find that all measures of markups are either procyclical or acyclical. Moreover, we show that monetary shocks lead markups to fall with output. The second part of the paper merges input-output information on shipments to the government with detailed industry data to study the effect of demand changes on industry-level markups. Industry-level markups are found to be decidedly procyclical in response to demand changes.

You can download a copy of the paper from the link above or on my Research page.