Measuring Competition in CESEE: Stylized Facts and Determinants across Countries and Sectors
Using the Amadeus firm-level database, this paper examines sector-specific indicators of competition in a number of Central, Eastern and Southeastern European (CESEE) countries. More specifically, it provides an overview of two key indicators of the level of competition, namely profit margins and the concentration of sales, across 27 industries in 13 CESEE countries. We discuss the advantages and disadvantages of various indicators of competition that are commonly used in the literature and explain why we use the aforementioned proxy variables for the intensity2 of competition. The paper then provides a cross-country and cross-sector overview of the differences in these competition indicators for the period from 1999 to 2007 before empirically identifying the main determinants of these differences. We find large differences between individual sectors, while differences between countries are considerably smaller. Profit margins and concentration ratios are notably high in communications, finance, housing, and miscellaneous goods and services. Manufacturing achieves, on average, lower profit margins and concentration ratios than other sectors. Over time, profit margins have increased in most sectors as a result of the rapid catching-up process in the CESEE region, while concentration ratios have declined, suggesting that the region is still in a phase of rapid market expansion. We observe some indication of an increase in competition in only a handful of sectors, e.g. housing and utilities, passenger transport, and information services. At the same time, in many retail trade sectors and in financial services, both profit margins and concentration ratios displayed disproportionately high growth in our sample period. All remaining sectors show diverging trends for both indicators.
Volume (Year): (2010)
Issue (Month): 3 ()
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- Jan Hagemejer & Michal Gradzewicz, .
"Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy,"
- Hagemejer, Jan & Gradzewicz, Michal, 2007. "Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy," MPRA Paper 15759, University Library of Munich, Germany.
- Jens Hölscher & Johannes Stephan, 2004. "Competition Policy in Central Eastern Europe in the Light of EU Accession," Journal of Common Market Studies, Wiley Blackwell, vol. 42(2), pages 321-345, 06.
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