In this paper, digital transformation is included in the heterogeneity model of firms. Based on a general equilibrium analysis, we find that under the effect of diminishing marginal productivity, digital transformation does not always have a positive impact on firms' markups, but has an...

Since the 1970s, there have been significant changes in firm dynamics within and across industries in the US. Industries are increasingly dominated by a small number of large firms ("superstars"). Markups, market concentration, profits, and R&D spending are increasing, whereas business dynamism,...

Several models posit a positive cross-sectional correlation between markups and firm size, which, among others, characterizes misallocation, factor shares, and gains from trade. Yet, taking labor market power into account in markup estimation, we show that larger firms have lower markups. This...