Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu imply that the predicted negative impact of the regulation on firms' economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth. Terms of use: Documents in
This paper presents an analysis of the recent developments of average market power in Europe by using a broad firm-level database for EU member states. To indicate competitive pressure at the firm-level, markups are estimated following De Loecker (2011), and De Loecker and Warzynski (2012). The analysis reveals a sharp drop in markups during the crisis, followed by a post-crisis increase. The European average has not yet reached its pre-crisis level, which is in contrast to results for the US, where average markups have climbed to pre-crisis levels already in 2011. There is significant heterogeneity among European economies and the pre-crisis levels do have been exceeded in some countries.JEL Classification: E2, D2, D4, L1
and Leuphana University L€ uneburg, L€ uneburg, Germany | INTRODUCTIONThis study evaluates the pro-competitive effect of foreign market penetration with a broad interindustry and cross-country database of European manufacturing firms. The main contribution is an analysis of the heterogeneous effects of different modes of foreign market penetration, imports and inward foreign direct investment (FDI), which have been assigned fundamental differences by economic theory. In empirical studies, these differences have been neglected in relation to competitive effects.Foreign market penetration has gained relevance for the European competitive environment in an EU single market framework since the latest large-scale accession in 2004 and in the context of recent free trade negotiations. The coexistence of imports and FDI in particular is also of increasing empirical importance due to a massive relative increase in the latter in the past decades.The impact of increasing foreign competition on domestic markets has long been studied both theoretically and empirically. A pro-competitive effect of foreign competition is predicted by international trade models with imperfect competition due to a market expansion and an industry restructuring in favour of more efficient firms. This pro-competitive effect, in terms of decreasing markups, has been traditionally tested using some measure of import penetration as a proxy for trade openness and has found general support.A more recent strand of the empirical literature focuses on inward FDI as a second channel for foreign market penetration, which may also have a positive impact on markups through positive spillovers. Another reason why imports and FDI may affect markups differently can be derived straightforwardly from theories of international trade and heterogeneous firms that predict a productivity advantage of firms undertaking FDI. Consequently, competing with foreign firms via imports should mean competing with less productive firms as compared with a situation of competition with foreign multinationals that produce on the spot.
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