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Mark-Ups in the Digital Era: What the OECD Study Found

The OECD study found that estimated mark-ups rose from 2001 to 2014, chiefly among firms at the top of the distribution, and were higher in digitally intensive sectors.
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Yes: firms in more digitally intensive sectors had higher estimated mark-ups than firms in less digital sectors, and the gap widened between 2001 and 2014. But the OECD study does not show that digitalisation alone caused higher mark-ups. Its more precise finding is that the overall rise was concentrated among firms already near the top of the mark-up distribution, while the bottom half had a flat trend.

What “mark-up” means in this study

In economics, a mark-up relates the price a firm charges to its marginal cost of producing another unit. Researchers use estimated firm-level mark-ups as one indicator of market power and competitive conditions. A higher estimate is not a direct count of price increases, proof of illegal conduct, or a complete measure of competition in a market.

The title refers to an OECD working paper by Sara Calligaris, Chiara Criscuolo, and Luca Marcolin, published on April 25, 2018. The paper examines firm mark-ups and sector digital intensity; it is not about HTML or document formatting. See the OECD publication record and the working paper.

What the OECD study found

The published paper covers firms in 26 countries over 2001–2014. Its main results are about patterns in estimated mark-ups over that historical period:

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  • Average firm-level mark-ups rose.
  • The increase came from firms at the top of the mark-up distribution; the bottom half had a flat trend.
  • Firms in digitally intensive sectors had higher mark-ups than firms in less digitally intensive sectors.
  • The difference between those sector groups widened over time.

The paper’s abstract does not state a single percentage for the overall increase, so the trend is best described without assigning it an unsupported headline figure.

How large was the digital-sector gap?

A 2019 OECD synthesis reports estimates based on the 2018 analysis: average mark-ups in digital-intensive sectors were 13%–16% higher, and firms in the most digitally intensive sectors had mark-ups up to 55% higher than firms in less digitally intensive sectors. These are not interchangeable estimates: the reported gap depends on how sectors are grouped and on the model specification. The synthesis discusses those estimates in “Mark-ups in the digital era”.

Read those figures as comparisons in OECD analyses, not as a prediction that a particular digital company charges 13%–55% more, or that consumers in every digital market pay that much extra. They describe estimated mark-up differences across firms or sector groups under particular methods and controls.

Why the findings do not prove digitalisation caused mark-ups to rise

The paper relates firm-level mark-ups to sector digital intensity and examines possible contributions from market structure and production technology. That can identify associations and explore explanations, but it does not establish that digitalisation by itself caused the increase.

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Digital technology can work in opposing directions. It may make entry and business operations cheaper, increasing competitive pressure. At the same time, network effects and economies of scale can strengthen the position of firms that attract many users or control valuable platforms. These are possible mechanisms, not a claim that every digital market follows the same path.

What market structure and technology may explain

A July 2018 presentation by the authors gives supplementary estimates of how selected factors relate to the digital-indicator association. In that presentation, market-structure indicators account for estimates ranging from 8% for product-market regulation to 38% for import competition. Adding intangible assets and patents accounts for up to half of the digital differential. These figures are exploratory presentation results, not universal causal shares.

The presentation’s sample description lists 25 countries and approximately 2.5 million observations, with manufacturing and non-financial market services, firms with more than 20 employees, and consolidated accounts. This differs from the published paper abstract’s 26-country scope. The presentation also describes digital-intensity indicators such as e-commerce, ICT investment and inputs, manufacturing robots, ICT specialists, software, and digital capital. It reports checks using alternative mark-up and productivity measures, country exclusions, surviving firms, and initial-period digital intensity; such checks do not mean every specification produces identical results. The supplementary material is available in the authors’ July 23, 2018 presentation.

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How to interpret the study today

The central result is historical, not a measurement of current mark-ups: the firm data end in 2014. The findings support the conclusion that mark-ups and digital intensity were associated in the studied period, and that the gap widened; they do not establish the size of today’s gap or show that digitalisation alone produced it.

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When comparing the paper with later OECD figures, keep the period, country and sector coverage, definition of digital intensity, mark-up estimation method, controls, and whether a result is descriptive or causal in view. A percentage from one grouping or specification should not be merged with another as though both measured the same thing.

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