Just like the two friends being chased by the bear -- you don't need to be faster than the bear, you just need to be faster than your friend.
perfect competition, symmetric monopolistic competition, for example. it is done all the time in this literature.
I understand that. But these are simplifying assumptions that make the modeling easier. The question is are these assumptions good enough to represent the real world? My prior on this is no, but I'm open to being shown that I'm wrong.
Just like the two friends being chased by the bear -- you don't need to be faster than the bear, you just need to be faster than your friend.
perfect competition, symmetric monopolistic competition, for example. it is done all the time in this literature.
I understand that. But these are simplifying assumptions that make the modeling easier. The question is are these assumptions good enough to represent the real world? My prior on this is no, but I'm open to being shown that I'm wrong.
Point well taken. But the more specific point is that Jaumandreu does not acknowledge this issue, i.e. under the assumptions typically made in this literature, DW is completely consistent.
Point well taken. But the more specific point is that Jaumandreu does not acknowledge this issue, i.e. under the assumptions typically made in this literature, DW is completely consistent.
The questions was are the assumptions realistic or not though... you can't simply say other people also assume in a literature to justify it.
Jamandreu paper is about JDL method, not about his recent work on markups. Discussion on this thread show how clueless people are
Who’s clueless?
Jamandreu:
“De Loecker and Warzynski (2012), henceforth DLW, proposed a way to estimate markups under imperfect competition from firm-level data. ... The application of the proposal, ignoring this fact, is likely to produce inconsistent estimates and generate large biases in inferences about markups“
De Loecker and Eeckhout (2018): “We rely on a recently proposed framework by De Loecker and Warzynski (2012), based on the insight of Hall (1988) to estimate firm-level markups.“
Looks like no one really understands the problem here. Jamandreu paper is not only about DLW2012 or DLE2018. It says more generally, that OP/LP/ACF doesn't work under imperfectly competitive market. The fact is, in a real world with input friction, markup variation, time-invariant technology, and unobserved productivity at the same time, all IO to toilet. BTW, DJ2013 also sucks.
Looks like no one really understands the problem here. Jamandreu paper is not only about DLW2012 or DLE2018. It says more generally, that OP/LP/ACF doesn't work under imperfectly competitive market. The fact is, in a real world with input friction, markup variation, time-invariant technology, and unobserved productivity at the same time, all IO to toilet. BTW, DJ2013 also sucks.
OP here,
this guy got it right!
Looks like no one really understands the problem here. Jamandreu paper is not only about DLW2012 or DLE2018. It says more generally, that OP/LP/ACF doesn't work under imperfectly competitive market. The fact is, in a real world with input friction, markup variation, time-invariant technology, and unobserved productivity at the same time, all IO to toilet. BTW, DJ2013 also sucks.
So pretty much, we haven't learned anything from the structural estimation IO literature? (at least using the production approach of estimating mark-ups)
Looks like no one really understands the problem here. Jamandreu paper is not only about DLW2012 or DLE2018. It says more generally, that OP/LP/ACF doesn't work under imperfectly competitive market. The fact is, in a real world with input friction, markup variation, time-invariant technology, and unobserved productivity at the same time, all IO to toilet. BTW, DJ2013 also sucks.OP here,
this guy got it right!
But everyone knew this already. They only work in very special cases of imperfectly competitive markets, e.g. where each firm faces the exact same downward sloping demand curve, e.g. the monopolistic competition models used by the macro literature.