Figure 1: Markup Distributions: Kernel densities of markups for the firms whose equities are in the TIC data set over two time samples: 2004-2009 and 2017-2022. Securities are matched with markups computed using data from Compustat Global. Markups are weighted
by market capitalization share of TIC holdings.
The top panel plots the kernel densities of markups for foreign firms held by US investors separately for the time period 2004-2009 and 2017-2022. Both series start at a density near 0.1 at a markup value of 0.75. The density increases rapidly to near 1 at a markup of just over 1, then declines rapidly, reaching a density of 0.2 at a markup of 2, a density of 0.05 near a markup of 4, then is near zero at a markup of 5. The density for the markup in the later period is generally slightly higher than the density for the earlier period for markups larger than 2, indicating a slightly bigger mass on higher markup values.
The bottom panel plots the kernel densities of markups for foreign firms held by US investors separately for the time period 2004-2009 and 2017-2022. The density for the early period starts at 0.4 for a markup value of 1, jumps to a peak of 0.85 at a markup of near 1.5, falls to a density of 0.1 at a markup of 3 then declines to a density near zero at a markup of 8. The density for the later period starts at 0.2 for a markup value of 1, jumps to a peak of 0.75 at a markup value of near 1.5, falls to a density of 0.1 at a markup of 3 then declines more slowly to a density of near zero at a markup of 8. The density for the markup in the later period is generally higher than the density for the earlier period for markups larger than 2, indicating a slightly bigger mass on higher markup values in the later period.
Figure 2: Markup Distributions by Industry: Kernel densities of markups for the firms whose equities are in the TIC data set over two time samples: 2004-2009 and 2017-2022. Securities are matched with markups computed using data from Compustat Global. Markups
are weighted by market capitalization share of TIC holdings.
The top panels plot the kernel densities of markups for foreign firms held by US investors separately for the time period 2004-2009 and 2017-2022. The densities are plotted separately for 6 industries. For foreign firms in the consumer industry, for both time periods the density starts near 0.1 at a markup of 0.5. The density increases rapidly to near 1 at a markup of just over 1, then declines rapidly, reaching a density of 0.2 at a markup of 2, a density of 0.05 near a markup of 3, then is near zero at a markup value of 5. The density in the later period is generally higher than the density in the earlier period for markups greater than 2, indicating a slightly bigger mass on higher markups in the later period.
For foreign firms in the oil, gas, and mining industries, for both time periods the density is near 0.1 at a markup value of 0.5. For the earlier period, the density increases rapidly to near 1 at a markup of just over 1, then declines rapidly, reaching a density of 0.2 at a markup of 2, a density of 0.05 near a markup of 3, then is near zero at a markup value of 4. For the later period, the density increases rapidly to near 1 at a markup of just over 1, then declines rapidly, reaching a density of 0.25 at a markup of 2, then jumps back up to a density of 0.55 at a markup of 2.5. It then falls to a density of 0.05 near a markup of 3, then is near zero at a markup value of 4. The density in the later period is generally higher than the density in the earlier period for markups greater than 2, indicating a slightly bigger mass on higher markups in the later period.
For foreign firms in the financial industry, for the early period the series starts at a density value of 0.5 at a markup value of 0.5. The density increases to near 0.75 at a markup of just over 1, then declines with some volatility, reaching a density near zero at a markup of 3.5. For the later period, the series starts at a density value of 0.25 at a markup value of 0.5. then trends lower reaching a density of 0.1 at a markup of 5 and a density near zero at a markup of 7. The density in the later period is below that of the early period until a markup value of 3, then has a higher density than the earlier period for the markup values greater than 3.
For foreign firms in the IT, electronics, and pharma industries, for both time periods the density is near 0.2 at a markup value of 0.5. The density increases rapidly to near 0.65 at a markup of just over 1, then declines to a density of 0.2 at a markup of 2, is stable around a density of 0.2 until a markup of 3, then resumes its decline to near zero at a markup value of 5. The density in the later period is generally not systematically above or below the density in the earlier period.
For foreign firms in the manufacturing and construction industries, for both time periods the density is near 0.1 at a markup value of 0.5. The density increases rapidly to near 2 at a markup of just over 1, then declines rapidly, reaching a density of 0.1 at a markup of 2, then is near zero at a markup value of 2.5. The density in the later period is generally not distinguishable from the density in the earlier period.
For foreign firms in the utilities and transportation industries, for the early period the series starts at a density of 0.1 at a markup of 0.5. The density increases to near 0.75 at a markup of just over 1, stays there until a markup of 1.5, then declines steadily aside from a brief upward blip at a markup just above 3, and is near zero at a markup of 4. For the later period, the series starts at a density of 0.1 at a markup of 0.5, jumps to a density of 1.2 at a markup of 1, drops to a density of 0.75 at a markup of 1.5 and stays there until a markup of 2, then declines steadily, reaching a density of 0.1 at a markup of 2 and is near zero at a markup of 4.
For US firms in the consumer industry, for both time periods the density is near 0.1 at a markup of 0.5. The density increases rapidly to near 2 at a markup of just over 1, then declines with rapidly but with some volatility, reaching a density near zero at a markup value of 2. The density in the later period is generally not distinguishable from the density in the earlier period.
For US firms in the oil, gas, and mining industries, for the early period the series starts at a density value of 1 at a markup of 0.5. The density increases to over 3 at a markup of around 1, then declines rapidly to near zero at a markup of 1.5. For the later period, the series starts at a density value of 0.7 at a markup value of 0.5, jumps to a density of 2 at a markup of 1, drops to a density of 0.75 at a markup of 1.5 and stays there until a markup of 1.75, then declines rapidly and is near zero at a markup of 2. The density in the later period is generally higher than the density in the earlier period for markups above 2, indicating a slightly bigger mass on higher markup values in the later period.
For US firms in the financial industry, for the early period the series starts at a density of 0.35 at a markup of 0.5. The density increases to near 0.75 at a markup of just over 1, then declines steadily, reaching a density near zero at a markup of 4. For the later period, the series starts at a density of 0.35 at a markup of 0.5, rises slightly to a density of 0.45 at a markup of around 2, then trends lower reaching a density of 0.1 at a markup of 2.5. The density ranges between 0.1 and 0.15 for markups between 2.5 and 4.5, then declines gradually to near zero at a markup of 7. The density in the later period is below that of the early period until a markup value of 3, then has a higher density than the earlier period for the markup values greater than 3.
For US firms in the IT, electronics, and pharma industries, for the early time period the density starts near 0.2 at a markup of 0.5. The density increases rapidly to a bit above 0.4 at a markup of 1, then declines to a density of 0.1 at a markup of 3.5, then more slowly to a density near zero at a markup value of 7.5. For the later period, the density starts near 0.1 at a markup value of 0.5. The density increases rapidly to 0.4 at a markup of just over 1, then declines with some volatility until it reaches a density of 0.05 at a markup of 5 then is near zero at a markup value of 7.5. The density in the later period is generally higher than the density in the earlier period up to a markup of 4 and for markups above 7, but for markups between 4 and 7 the density in the early period is higher.
For US firms in the manufacturing and construction industries, for the early period the series starts at a density of 0.5 at a markup of 0.5. The density increases to almost 3 at a markup of around 1, then declines rapidly to near zero at a markup of 1.5. For the later period, the series starts at a density of 0.5 at a markup of 0.5, jumps to a density of just above 2 at a markup of 1, drops to a density of 0.75 at a markup value of 1.5 and stays there until a markup value of 1.75, then declines rapidly and is near zero at a markup of 1.8. The density in the later period is generally higher than the density in the earlier period for markups greater than 1.5, indicating a slightly bigger mass on higher markup values in the later period.
For US firms in the utilities and transportation industries, for the early period the series starts at a density of 0.1 at a markup of 0.5. The density increases to near 0.75 at a markup of just over 1, briefly declines then rises to a density of 1.1 at a markup of 1.75, then declines to near zero at a markup of 2.5. For the later period, the series starts at a density of 0.1 at a markup of 0.5, jumps to a density of 0.75 at a markup of 1, briefly declines then jumps to a density of 1.5 at a markup of 1.75, then declines rapidly and is near zero at a markup of 2. The density in the early period is generally higher than the density in the earlier period for markup values greater than 1.75, indicating a slightly bigger mass on higher markup values in the early period.
Figure 3: Within-Between Decomposition: Decomposition of changes in aggregate productivity, MRPK, and markups into within, between, and covariance effects. The bars plot the three-year moving average of each component. The aggregate measures are constructed by weighting each firm-level measure by the share of each firm in the TIC data set.
This figure is a 6 panel set of stacked bar charts. The bars plot within, covariance, and between components of the within-between decomposition by year. The within-between decomposition of firm productivity, MRPK, and markups are plotted separately for US firms and for foreign firms. For all three measures for both US and foreign firms, the between component has largest contribution in almost every year. For US firms, the sum of the three components for all three firm measures are strongly positive from 2004 to 2008, negative from 2009 to 2011, small in 2012 and 2013, then strongly positive from 2014 to 2021. For foreign firms, for firm productivity the values are strongly positive in 2004, negative in 2005, positive from 2006 to 2012 but trending lower, small or negative from 2014 to 2018, then strongly positive from 2019 to 2022. For MRPK for foreign firms the components are strongly positive from 2004 to 2009, negative from 2010 to 2012, small and positive from 2013 to 2016, then strongly positive from 2019-2022. For markups for foreign firms the components are strongly positive in 2004 and 2005, smaller but variable from 2006 to 2016, then strongly positive from 2019-2022.