When firms sell in multiple markets, demand-side markup estimates from a single market need not align with supply-side estimates derived from production data that aggregate across markets. Empirical analysis of this divergence has been constrained by a lack of market-specific cost data. We address this by showing that production markups can be expressed as a revenue-weighted average of demand markups across markets and products, which allows the relationship between the two measures to be quantified using revenue shares and markups in domestic and foreign markets - information that is generally more accessible than cost data. Applying this approach to UK car manufacturers, we find that supply-side markups increased between 1998 and 2018, while demand-side markups declined. These trends can be reconciled by an increase in the markup that UK-based producers gained on their exports, which we corroborate using administrative trade data. We find evidence that increases in supply-side markups have been driven by exports, particularly to China where prices are high relative to other export markets. Our results highlight how international market exposure can drive aggregate markups and generate differences between supply- and demand-based measures of market power.
Parts of this work were produced using statistical data from the UK Office for National Statistics ("ONS"). The use of ONS data does not imply the endorsement of the ONS in relation to its interpretation or analysis. Analysis using ONS research datasets may not exactly reproduce ONS aggregates and was carried out in the Secure Research Service, part of the Office for National Statistics.
Agnes Norris Keiller, Tim Obermeier, Andreas Teichgraeber and John Van Reenen
6 January 2026 Paper Number POIDWP131
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