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Competition in the Portuguese Economy: Insights from a profit elasticity approach

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  • João Amador
  • Ana Cristina Soares

Abstract

This article takes the set of Portuguese markets and computes a new competition measure suggested by Boone (2008), which draws on the concept of profit elasticity to marginal costs in a given market. The article concludes that the majority of markets presented a reduction in competition in the period 2000-2009, though there is substantial heterogeneity. In addition, markets that faced competition reductions represent the large majority of sales, gross value added and employment in the Portuguese economy. The non-tradable sector presents lower competition intensity than the tradable sector. Moreover, reductions in competition are relatively widespread across markets in both sectors, but in terms of sales, gross value added and employment these reductions are more substantial in the non-tradable. In the majority of markets the assessment on the evolution of competition using profit elasticities is similar to that obtained with classical competition indicators.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201217.

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Date of creation: 2012
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Handle: RePEc:ptu:wpaper:w201217

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  1. Jan Boone & Henry van der Wiel & J. van Ours, 2007. "How (not) to measure competition," CPB Discussion Paper 91, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian van Rixtel, 2008. "Impact of bank competition on the interest rate pass-through in the euro area," Banco de Espa�a Working Papers 0828, Banco de Espa�a.
  3. 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.
  4. Chiara Peroni & Ivete Ferreira, 2012. "Competition and Innovation in Luxembourg," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 93-117, March.
  5. Carlo Altomonte & Marcella Nicolini & Armando Rungi & Laura Ogliari, 2010. "Assessing the Competitive Behaviour of Firms in the Single Market: A Micro-based Approach," European Economy - Economic Papers 409, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  6. Alexander Schiersch & Jens Schmidt-Ehmcke, 2010. "Empiricism Meets Theory: Is the Boone-Indicator Applicable?," Discussion Papers of DIW Berlin 1030, DIW Berlin, German Institute for Economic Research.
  7. Polder, Michael & Veldhuizen, Erik & Bergen, Dirk van den & Pijll, Eugène van der, 2009. "Micro and macro indicators of competition: comparison and relation with productivity change," MPRA Paper 18898, University Library of Munich, Germany.
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Cited by:
  1. João Amador & Ana Cristina Soares, 2013. "Competition in the Portuguese economy: Estimated price-cost margins under imperfect labour markets," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  2. Koski, Heli, 2013. "The Impact of the USO on the Profitability of Postal Service Provision in Finland," ETLA Working Papers 22, The Research Institute of the Finnish Economy.
  3. João Amador & Ana Cristina Soares, 2012. "Measuring competition in the Portuguese economy using profit elasticities," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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