In a set of working papers (which you do not have to read) from 20172 and 20183, economists Jan De Loecker and Jan Eeckhout track the average firm's mark-up over marginal cost, first for the United States (2017 paper) then for a wider set of 70,000 firms across 134 countries (2018 paper). Average country mark-ups were calculated based on the firms which had headquarters in those countries.

1. (a)What is the basic finding from De Loecker & Eeckhout (2018), depicted in the figure above?
2. (b)What are the implications of your answer to (a) in terms of (i) the general level of competition in the global economy, (ii) the profit share in the economy, (iii) the labour share in the economy, (iv) the price level and (v) average welfare in the world economy?

(c) Can you think of any benign interpretations of the trend in the mark-ups?

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1.6+ 1.5- 1.4+ 1.3+ 1.2- 1.1 1980 1990 2000 2010 The vertical axis here depicts the global average mark-up for a set of 70,000 publicly traded firms around the world. Data run from 1980 to 2016 and are from De Loecker & Eeckhout (2018)