The Fall and Rise of Market Power in Europe

Abstract

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

The Drivers of Income Inequality in Rich Countries

“…On the one hand, Deutsche Bundesbank () uses firm‐level data for seven European countries, covering the 27 industries over the 1996–2014 period, finding stable mark‐ups pre‐recession, with a fall afterwards . This result seem consistent with Weche and Wambach (), who use a sample of more than 3.6 million firms, covering 18 European countries for the 2007–2015 period, and finding a sharp fall in mark‐ups during the Great Recession, with some partial recovery afterwards. This pro‐cyclical behaviour of mark‐ups has also been documented for the United States (e.g.…”

Markups in a dual labour market: The case of the Netherlands

“…The authors also find that digital intensive sectors have higher markups than other sectors. Weche and Wambach (2018) analyse the markup for seventeen EU countries from 2007 to 2015. Contrary to the previous papers, they find that the average weighted markup hardly increased over this time period.…”

“…Other studies find that markups in the US and Europe have increased only moderately or even remained more or less stable (i.e. Traina, 2018;De Loecker et al, 2018;Hall, 2018;Cavalleri et al, 2019;Weche and Wambach, 2018). These differing results have triggered a discussion on methodology (see e.g.…”

Exploitative Abuse and Abuse of Economic Dependence: What Can We Learn From an Industrial Organization Approach?

“…This in turn has led to wealth transfers between consumers and firms, which can cause macroeconomic imbalances (Khan and Vaheesan [2017]). Also, the recent economic literature emphasizes various negative welfare effects (on macroeconomic as well as on dynamic welfare) from an increase in industry concentration and market power across many markets, particularly in the U.S. but also internationally (although more mixed across Europe, see Weche & Wambach [2018]), which are considerably weakening the process of competition (Autor et al [2017]; Grullon et al [2017]; Gutiérrez and Philippon [2018]). 14 6.…”