Changing institutions in the European market: the impact on mark-ups and rents allocation
AbstractWe investigate whether the completion of the Single Market Programme has enhanced competition on the product markets across European countries, taking into account the companion structural reforms undertaken by the member countries, particularly in the labour market and the institutional setting of important industries (i.e. network industries). We test for a break in both mark-ups and the division of rent between capital and labour based on a statistical model incorporating efficient bargaining in the labour market. Using industry data for ten EU countries we find that, without controlling for changes in the rent sharing, mark-up estimates tend to increase in the 1990s. However, once we assume efficient bargaining in the labour market, mark-ups remain virtually unchanged or, in some sectors or groups of countries, even decrease; this reflects the declining shares of rents accruing to workers as a result of their diminished bargaining power. The evidence is particularly strong for high and medium-tech manufacturing, for construction and for those activities that went through deep institutional changes and privatization programmes.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 781.
Date of creation: Dec 2010
Date of revision:
institutional changes; mark-up; rent-sharing;
Other versions of this item:
- Antonio Bassanetti & Roberto Torrini & Francesco Zollino, . "Changing Institutions in the European Market: the Impact on Mark-ups and Rents Allocation," Working Papers 11, Department of the Treasury, Ministry of the Economy and of Finance.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-EEC-2011-01-03 (European Economics)
- NEP-EUR-2011-01-03 (Microeconomic European Issues)
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