Globalization and the markups of European firms
We use a unique cross section survey of manufacturing firms from four European countries (France, Germany, Italy, Spain) linked with balance 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 correlated with markups; (iii) Firms with affiliates have higher markups than other firms, while simply membership in a group or being foreign owned seems 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 globalized' firms tend to charge around 100% higher markups than non globalized firms.