Measuring Competition in Slovenian Industries

Molnár, Margit

doi:10.1787/5kmd41bjwr0q-en

Cited by 13 publications

(8 citation statements)

References 8 publications

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“…This outcome contradicts with previous studies regarding independent European countries (Molnár, 2010;Polemis, 2014), and indicates no evidence of market power in the specific sectors.…”

Section: About Here>contrasting

confidence: 99%

“…On average, mark-up ratios in Eurozone industries appear particularly low in comparison with other OECD countries (Molnár, 2010;Christopoulou and Vermeulen, 2012;Maioli, 2004) but the average reveals differences across sectors (heterogeneity). This is not surprising given that on the one hand, sector specific characteristics affect the mark-up companies' pricing behaviour (prices above average costs), while on the other hand, the regulatory barriers (i.e legalities) vary considerably across sectors distorting the level of competition.…”

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confidence: 97%

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Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach

Polemis

Fotis²

2015

J Ind Compet Trade

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This paper provides estimates of price-marginal cost ratios for manufacturing and services sectors in the Eurozone, the US and Japan over the period . The estimates are obtained applying τhe methodology developed by Hall (1988) and extended by Roeger (1995) indexes, and the degree of sectoral regulation. However, these indicators do not always reflect the real degree of competition in a sector (Trėsor-Economics, 2008). 3An alternative approach is to use national accounts data to infer conclusions about the difference between the selling price (P) and the marginal cost (MC), since the less competition there is in a sector, the more the price can diverge from the marginal production cost. In other words, we can use the ratio between the sale price and the marginal production cost (mark up ratio) in order to gauge the intensity of competition in a sector. As a consequence, mark-up estimates of different sectors and different countries allowing for comparisons of the degree of competition, they should help in identifying which sectors and/or countries would benefit most from changes in legislation or regulation that affect competition.The approach adopted here is to estimate econometrically the level of market power by following the methodology developed by Hall (1988) and extended by Roeger (1995). This methodology is based on the hypothesis that in a situation of perfect competition the selling price is equal to marginal cost. The equality of marginal cost and price is essential for the efficiency of the economy since, first, competitive markets can achieve higher productivity levels, and second, competition provides consumers with products of higher quality, increased variety and lower prices (Rezitis and Kalantzi, 2013). However, this condition does not apply in a less competitive environment (i.e oligopoly markets, monopolies), since the price deviates from marginal cost. Therefore, the ratio between the selling price and marginal cost assesses the competitiveness of the market. However, while selling price is directly observable, the marginal production cost is not. This drawback was overcome by Hall (1988) and Roeger (1995) who both showed that under perfect competition, the nominal growth rate of the Solow residual is independent of the nominal capital productivity growth rate. It then follows that the coefficient linking the nominal 4 growth rate of the Solow residual to the nominal capital productivity growth is the Lerner Index defined as the ratio of the price minus marginal cost to priceDespite the voluminous amount of work on the topic, none of these studies -to the best of our knowledge-has examined this relationship for the Eurozone countries. Furthermore, unlike previous studies, we use an array of econometric techniques (OLS, 2SLS and bootstrap methods) to test the robustness of the results. The scope of this paper is that its empirical findings might be used as a benchmark to otherEuropean countries in order to asses the degree of competition in certain manufacturing and services sectors...

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“…This outcome contradicts with previous studies regarding independent European countries (Molnár, 2010;Polemis, 2014), and indicates no evidence of market power in the specific sectors.…”

Section: About Here>contrasting

confidence: 99%

mentioning

confidence: 97%

Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach

Polemis

Fotis²

2015

J Ind Compet Trade

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“…On average, mark-up ratios in Greek industries do not appear particularly high in comparison with other OECD countries (Maioli 2004;Molnár 2010;Christopoulou and Vermeulen 2012) but the average reveals large differences across sectors (heterogeneity). This is not surprising given that, on the one hand, sector-specific characteristics affect the mark-up companies' pricing behaviour (prices above average costs), while on the other hand, the regulatory barriers (i.e.…”

Section: Resultsmentioning

confidence: 91%

“…Most of these studies consent that mark-up ratios exceed unity denoting the absence of competitive conditions in certain sectors/industries (see for example Martins, et al 1996;Dobbelaere 2004;Borg 2009;Molnár 2010;Bottini and Molnár 2010;Christopoulou and Vermeulen 2012). This finding constitutes a major hypothesis that is empirically tested by using different econometric techniques, such as panel data methods (fixed, random effects) or cross-section analysis, in order to assess the level of competitive conditions in an industry.…”

Section: Survey Of the Literaturementioning

confidence: 99%

“…Lastly, there is sufficient evidence that the magnitude of the mark-ups does not significantly change when splitting the time span. In a similar study (Molnár 2010), mark-up ratios are estimated using Roeger (1995) methodology for manufacturing and service industries in Slovenia at a sectoral disaggregated level. The estimation is performed for the period 1993-2006 and uses firm level data of the Amadeus database.…”

Section: Survey Of the Literaturementioning

confidence: 99%

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Measuring market power in the Greek manufacturing and services industries

Polemis

2014

International Review of Applied Economics

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This paper investigates the level of market power in the Greek manufacturing and services industry over the period . Based on the Roeger methodology, we investigate the competitive conditions in the examined industries at a disaggregated level (two and three digit ISIC codes). The empirical results indicate that the Greek manufacturing and services industries operate in non-competitive conditions. Moreover, average mark-up ratios are heterogeneous across sectors, with manufacturing having higher mark ups on average than services. In contrast to other related studies, we provide sufficient evidence about the movements of mark-up ratios over time. According to our findings, the mark-up ratios in the manufacturing sectors are, on average, higher in the post European Union (EU) accession period (1982)(1983)(1984)(1985)(1986)(1987)(1988)(1989)(1990)(1991)(1992), as a result of the merger wave in the manufacturing industry. However, this upward trend stopped within the period (1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007), and the relevant ratios have decreased substantially. The econometric results are quite robust when the Two Stage Least Squares (2SLS) and the bootstrap method are applied. Lastly, the results of our analysis have a number of interesting implications for policy makers and government officials in light of the recent financial crisis that hit Greece.

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Factorial Analysis of the Correlation Between Competitive Strategy and Company’s Characteristics: The Case of Romanian Business Environment

Dima

2013

The Changing Business Landscape of Romania

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Measuring Competition in Slovenian Industries

Cited by 13 publications

References 8 publications

Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach

Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach

Measuring market power in the Greek manufacturing and services industries

Factorial Analysis of the Correlation Between Competitive Strategy and Company’s Characteristics: The Case of Romanian Business Environment

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