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Measuring the Deviations from Perfect Competition: International Evidence

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  • Razzak, Weshah

Abstract

We use aggregated macroeconomic data for 43 countries to test the microeconomic condition for Perfect Competition, whereby the price level is equal to the marginal cost in the long run. We postulate two forms of Perfect Competition in the macro data: a weaker-form and a stronger-form. The former exists if the price level and the marginal cost share a common long-run trend; i.e., cointegrated. The latter exists if the market price and the marginal cost are equal in the long run.

Suggested Citation

  • Razzak, Weshah, 2023. "Measuring the Deviations from Perfect Competition: International Evidence," MPRA Paper 119605, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119605
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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