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Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data

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  • Tor Jakob Klette

Abstract

This paper presents a new econometric framework that permits simultaneous estimation of price‐cost margins, scale economies and productivity from a panel of establishment data. The model contains only a few, economically interesting parameters to be estimated, but it is nevertheless consistent with a flexible (translog) underlying technology, quasi‐fixed capital and the presence of persistent differences in productivity between establishments. The framework is applied to study market power, scale economies and productivity differences in a number of manufacturing industries in Norway. The results reveal statistically significant, but quite small, margins between price and marginal costs in most manufacturing industries.

Suggested Citation

  • Tor Jakob Klette, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    • Handle: RePEc:bla:jindec:v:47:y:1999:i:4:p:451-476
    DOI: 10.1111/1467-6451.00108
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    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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