Amusing this has been accepted just as MIT’s star job market candidates JMP destroys their method
Which paper? Link?
De Loecker and Eckhout go on all out attack
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So the QJE let it through.
Lol, these guys are unhinged. Overselling a flawed paper, and then going ad hominem. What Traina pointed out wasn't even the only flaw in their paper.
Yeah, probably the most obvious and uncontroversial flaw is something they don't even really address in their response - the Edmond, Midrigan, and Xu point that they should be weighting by cost shares rather than sales shares. This makes a HUGE difference: the sales-weighted markup average is way higher than the cost-weighted markup average, and has seen way more of an increase.
If we were using a simple, sales/total cost definition of the markup, then it would be obvious that we should weight firm-level ratios by shares of total cost, because that would recover the right aggregate ratio. (In general, if you are averaging ratios, you weight by the denominator rather than the numerator - not hard stuff!)
It is a bit more complicated here because we are interested in markups over marginal cost, but still, Edmond, Midrigan, and Xu point out that under reasonably general conditions it is theoretically most accurate to weight by cost. Weighting by sales gives hugely inflated values.
I think the Traina critique is broadly right too, but it is a bit trickier because it gets into this accounting morass that neither JDL and JE nor most macroeconomists know anything about -- what exactly is COGS vs. SG&A, and how does it map onto our notions of variable cost? JDL and JE are certainly wrong to claim that COGS = variable cost, and their results are vulnerable to economically irrelevant accounting changes in the extent to which variable vs. fixed costs have been counted as COGS vs. SG&A over time.
This is an interesting case: I'm not sure how many times I've seen a blockbuster paper get such incisive and damning critiques before it's published. I think it would be a bit depressing, actually, if JDL and JE's paper does publish well: the message it will send is "make some bad methodological decisions, get huge sexy numbers, then oversell those huge numbers, and you will get a QJE". I think their horrifying behavior wrt Traina is just one manifestation of the ugly game that is going on here.
At some point the QJE really has to ask whether they should let this one go through. -
Some people love it:
"Arguably the most important paper in industrial organization/antitrust in the last decade is now accepted at the QJE."
https://twitter.com/florianederer/status/1206941646727847936?s=20of course he likes it since there is time series upward trend in CO
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Amusing this has been accepted just as MIT’s star job market candidates JMP destroys their method
If you say this then you clearly don’t understand De Loecker’s method. Demirer applies the same methodology to estimate markup. His methodological contribution is something else.
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Neat.
https://twitter.com/chrisedmond/status/1390515950374449153?s=21
The Jans have a new set of thoughts
http://www.janeeckhout.com/wp-content/uploads/Thoughts.pdf
They are now much more respectful of Traina in footnote 1. And they discuss this weighting business. It doesn't seem to matterthe weighting business matters, and they are wrong. you can weight by sales, but please don't call it the "benchmark aggregate markup". weighting by sales, you are squaring the numerator, so what you get as "aggregate" reflects markup dispersion across firms. it does not make any sense. jans still to toilet.
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Eckhout is posting for a new pre doc RA, given all this controversy do people recommend going to work for him?
Slightly wary whether this entire scandal is a signal of other characteristics which would make him a difficult person to work for.. on that front where have his other pre docs placed?