Concentration, Market Power and Dynamism in the Euro Area

Abstract

Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. No 2253 / March 2019 Discussion papersDiscussion papers are research-based papers on policy relevant topics. They are singled out from standard Working Papers in that they offer a broader and more balanced perspective. While being partly based on original research, they place the analysis in the wider context of the literature on the topic. They also consider explicitly the policy perspective, with a view to develop a number of key policy messages. Their format offers the advantage that alternative analyses and perspectives can be combined, including theoretical and empirical work.Discussion papers are written in a style that is more broadly accessible compared to standard Working Papers. They are light on formulas and regression tables, at least in the main text.The selection and distribution of discussion papers are subject to the approval of the Director General of the Directorate General Research.

Car registration taxes across EU countries, MNEs’ profitability, and the role of market concentration

“…However, given that concentration ratio (CR) considers exclusively the relevance of the top -n firms and disregards the distribution of market shares of a given industry, it does not distinguish between markets in which, for instance, there are only four firms and those where there is a long tail of firms with smaller market shares. The HH Index solves this problem by calculating the square of the market share of each firm in the market and summing the resulting numbers, hence considering not only the equality of market shares across firms but also the number of firms in an industry (Cavalleri et al, 2019). A higher HHI implies weaker competition.…”

“…To overcome concerns over the representativeness of the data set at the country level over time, which arise in this case, only firms displaying on average at least 20 employees over the period, were considered in the analysis (Calligaris et al, 2018). 21…”

“…The following definition of the ultimate owner is used: The ownership path from the firm to its ultimate owner is characterized by an ownership share of more than 50% and firms for which no shareholder is identified or for which ownership shares are unknown are also considered as ultimate owners 21. As mark-ups are generally increasing with the firms' size (see e.g., De Loecker and Eeckhout, 2017), this restriction on the sample should not affect the qualitative conclusions of the analysis(Calligaris et al, 2018, p.10).…”

Concentration and Competition: Evidence from Europe and Implications for Policy

“…Grullon et al (2020) use US accounting data with adjustments to show that while industries with the largest increases in product market concentration show higher profit margins, there is no evidence for a significant increase in operational efficiency. Cavalleri et al (2019) report Euro-area price-cost margins based on firm level data (as the ratio of sales to variable costs).…”

“…Industry concentration:Bajgar et al (2019),Gutiérrez and Philippon (2020),Akcigit et al (2021), Aggregate profitability and labor share:Barkai (2020),Gutiérrez and Philippon (2020), Markups: De Loecker and Eeckhout (2018),Cavalleri et al (2019),Díez et al (2019),Weche and Wambach (2018), De Loecker et al (2020),Akcigit et al (2021).3 Akcigit et al (2021),Autor et al (2020),Berry et al (2019),Gutiérrez and Philippon (2020),Shapiro (2018Shapiro ( , 2019,Werden and Froeb (2018).4 Contracts COMP/2018/002 and COMP/2020/013.…”