Income Dispersion and Counter - Cyclical Markups : Supplementary Material and Technical Appendix

This appendix provides the formal proof of Proposition 1, an analytic calculation showing that indivisible x-goods are not essential for our main results, and a numerical example showing that our results can also be obtained in a random coefficients discrete choice demand system like that of Berry, Levinsohn and Pakes (1995), commonly used in the industrial organization literature. The appendix also outlines how the model with GHH preferences is solved numerically, does sensitivity analysis, and describes the data and calibration procedures in more detail. Finally, the appendix sketches a version of the model with endogenous risk sharing.