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By exploiting restrictions from dynamic theory and information from financial markets, we present a framework for generating quantitative evidence on market power and returns to scale. Tailoring the econometric model to firm\u2010level panel data, we calculate the percentage differential between price and marginal cost (the Lerner index) in terms of the parameters from the econometric system. Results for firms in eleven industries indicate that there is a great deal of heterogeneity in the extent of market power. Industries with significantly positive Lerner indices tend to have substantial increasing returns in the production technology. We find that there is only a modest relation between our estimated Lerner indices and traditional measures of market power and that, when market power varies temporally, it is usually procyclical. Thus, variations in the markup of price over marginal cost may help dampen aggregate economic fluctuations.<\/jats:p>","DOI":"10.1002\/jae.3950090105","type":"journal-article","created":{"date-parts":[[2007,7,12]],"date-time":"2007-07-12T17:20:23Z","timestamp":1184260823000},"page":"47-69","source":"Crossref","is-referenced-by-count":60,"title":["Economic fluctuations, market power, and returns to scale: Evidence from firm\u2010level data"],"prefix":"10.1002","volume":"9","author":[{"given":"R. S.","family":"Chirinko","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"S. 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