factor prices has a positive effect on markups. We show theoretically that firms with higher shares of inputs with volatile … prices set higher markups. We use the Bartik shift-share approach to empirically test whether firms which use more oil … relative to other inputs set higher markups when oil prices are more volatile. Our estimates imply that a one standard …

markups that we relate to variation in the elasticity of demand at the firm level. With directed search at the outset, a shock … that raises the matching rate for buyers improves conditions for them and tends to lower markups. Random matching follows … sequentially, and the same shock can lower the productivity threshold for operation, pushing up prices and markups for all firms …