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Has the EU’s Single Market Programme Fostered Competition? Testing for a Decrese in Markup Rations in EU Industries

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  • Harald Badinger

    ()
    (Europainstitut/Department of Economics, Wirtschaftsuniversität Wien)

Abstract

We use a panel approach, covering 10 EU Member States over the period 1981 to 1999, for each of three major industry groups (manufacturing, construction, and services) and 18 more detailed industries to test whether the EU’s Single Market Programme has led to a reduction in firms’ markups over marginal costs. We address explicitly the uncertainty with respect to the timing of the changeover and allow for a possibly continuous regime shift in a smooth transition analysis. Where regime shifts can be found, the velocity of transition is extremely high, making the linear model a justifiable approximation. We also test for discrete structural breaks in the time window from 1988 to 1996, taking up endogeneity concerns in a GMM framework. Markup reductions are found for aggregate manufacturing (though it is also suggested that markups increased in some manufacturing industries in the pre-completion period at the end of the 1980s) and – less robustly – for construction. In contrast, markups have gone up in most service industries since the early 90s, which confirms the weak state of the Single Market for services and suggests that anti-competitive defense strategies have emerged in the 1990s in service industries.

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Bibliographic Info

Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 135.

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Length: 40
Date of creation: 08 May 2007
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Handle: RePEc:onb:oenbwp:135

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Keywords: EU; markup; Single Market;

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Cited by:
  1. Zemanek, Holger & Belke, Ansgar & Schnabl, Gunther, 2009. "Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness," IZA Policy Papers 7, Institute for the Study of Labor (IZA).
  2. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2008. "Trade, Wages, and Productivity," IZA Discussion Papers 3682, Institute for the Study of Labor (IZA).
  3. João Amador & Ana Cristina Soares, 2012. "Competition in the Portuguese Economy: a view on tradables and non-tradables," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  4. Ansgar Belke & Holger Zemanek & Gunther Schnabl, 2010. "Current Account Balances and Structural Adjustment in the Euro Area," Ruhr Economic Papers 0176, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. repec:hal:wpaper:halshs-00566431 is not listed on IDEAS
  6. Jürgen Janger, 2008. "Supply-Side Triggers for Inflation in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 34–69.
  7. Ferguson, Shon, 2011. "Endogenous Product Differentiation, Market Size and Prices," Working Paper Series 878, Research Institute of Industrial Economics.
  8. 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.
  9. Ana Cristina Soares & João Amador, 2012. "Competition in the Portuguese Economy:An overview of classical indicators," Working Papers w201208, Banco de Portugal, Economics and Research Department.
  10. Robert C. Feenstra, 2007. "Globalization and Its Impact on Labour," wiiw Working Papers 44, The Vienna Institute for International Economic Studies, wiiw.
  11. Konings, Jozef & Roeger, Werner & Zhao, Liqiu, 2011. "Price-Cost Margins and Shares of Fixed Factors," CEPR Discussion Papers 8290, C.E.P.R. Discussion Papers.

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