Markup and Price Transmission:Spillover Effect or Absorption Effect?
Based on the pricing behavior of micro-enterprises,this paper theoretically analyzes the nonlinear relationship between different markup enterprises in terms of price transmission under cost shocks.The theoretical research finds that high markup enterprises show a stronger price-raising behavior under positive cost shocks,i.e.,price transmission shows spillover effects.However,under negative cost shocks,product pricing has not been significantly adjusted with cost reductions,but the impact of cost shocks has been absorbed by markup,which shows the absorption effect.In contrast,for low markup enterprises,price transmission shows the absorption effect under positive cost shocks and the spillover effect under negative cost shocks.This paper further empirically tests the above research conclusions at the industry level by using the double/debiased machine learning(DML)model based on nonparametric inference with continuous treatments.The research in this paper provides a new perspective for understanding price transmission behavior,which in turn has important reference significance for the prediction and prevention of inflation in China.
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