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Competition in the Portuguese economy: insights from a profit elasticity approach

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  • Amador, João
  • Soares, Ana Cristina

Abstract

This article segments the Portuguese economy into fairly disaggregated markets and estimates a new competition measure suggested by Boone (2008), which draws on the concept of profit elasticity to marginal costs. In addition, robustness of results across econometric specifications is discussed, along with their consistency with classical competition indicators. The article concludes that the majority of Portuguese markets exhibited 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 shows 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 sector. In the majority of markets the assessment on the evolution of competition using profit elasticities is similar to that obtained with classical competition indicators. JEL Classification: L10, L60, O50

Suggested Citation

  • Amador, João & Soares, Ana Cristina, 2013. "Competition in the Portuguese economy: insights from a profit elasticity approach," Working Paper Series 1603, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20131603
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    References listed on IDEAS

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    1. Uwe Hassler & Paulo M.M. Rodrigues & Antonio Rubia, 2016. "Quantile Regression for Long Memory Testing: A Case of Realized Volatility," Journal of Financial Econometrics, Society for Financial Econometrics, pages 693-724.
    2. 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.
    3. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian A.R.J.M. van Rixtel, 2013. "Impact of bank competition on the interest rate pass-through in the euro area," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1359-1380, April.
    4. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Discussion Paper 2007-014, Tilburg University, Tilburg Law and Economic Center.
    5. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Discussion Paper 2007-32, Tilburg University, Center for Economic Research.
    6. 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 2008 - 2015 409, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Chiara Peroni & Ivete Ferreira, 2012. "Competition and Innovation in Luxembourg," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 93-117, March.
    8. 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.
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Barros, Pedro Pita, 2017. "Competition policy for health care provision in Portugal," Health Policy, Elsevier, vol. 121(2), pages 141-148.

    More about this item

    Keywords

    market competition; portuguese economy;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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