This paper estimates firm-level markups using plant-level data and explores the relationship between markups and export behavior. The authors develop an estimating equation based on Hall (1986) and the control function approach of Olley and Pakes (1996). Their methodology allows for various price-setting models, dynamic inputs, and does not require measuring the user cost of capital or assuming constant returns to scale. They find that markups are significantly higher when controlling for unobserved productivity, exporters charge higher markups on average, and firms' markups increase (decrease) upon export entry (exit). These findings suggest a link between productivity and export status, and provide a potential explanation for the large measured productivity premia for firms entering export markets. The authors use a rich micro dataset of Slovenian firms from 1994-2000 to analyze the relationship between markups and export status. They find that markups differ significantly between exporters and non-exporters, and that markups increase for firms entering export markets. The paper also discusses the implications of these findings for international trade theory and policy.This paper estimates firm-level markups using plant-level data and explores the relationship between markups and export behavior. The authors develop an estimating equation based on Hall (1986) and the control function approach of Olley and Pakes (1996). Their methodology allows for various price-setting models, dynamic inputs, and does not require measuring the user cost of capital or assuming constant returns to scale. They find that markups are significantly higher when controlling for unobserved productivity, exporters charge higher markups on average, and firms' markups increase (decrease) upon export entry (exit). These findings suggest a link between productivity and export status, and provide a potential explanation for the large measured productivity premia for firms entering export markets. The authors use a rich micro dataset of Slovenian firms from 1994-2000 to analyze the relationship between markups and export status. They find that markups differ significantly between exporters and non-exporters, and that markups increase for firms entering export markets. The paper also discusses the implications of these findings for international trade theory and policy.