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Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy

Author

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  • Hagemejer, Jan
  • Gradzewicz, Michal

Abstract

The aim of this study is to analyse the impact of competition, both internal and external, and of the business cycle on monopolistic markups in the Polish economy. The results show that there are significant markups in several sectors of the economy which complies with earlier estimations by the authors. According to the estimations carried out, competition has a significant impact on the level of markups. This result applies both to internal competition, measured by market concentration, and foreign competition, measured by import penetration ratios. In addition, there was a significant negative correlation between markups and the macroeconomic cycle which seems to confirm the conclusions from numerous theoretical macro and microeconomic models. The results also point to a positive but less clear correlation between the sectoral cycle and the level of markups. A different reaction of markups to the sectoral and macroeconomic cycles may result from a different nature of adjustments of businesses in reaction to exogenous shocks affecting either the sectoral or the macroeconomic environment of the enterprises.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:15759
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    File URL: https://mpra.ub.uni-muenchen.de/15759/1/MPRA_paper_15759.pdf
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    References listed on IDEAS

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    1. Susan Athey & Kyle Bagwell & Chris Sanchirico, 2004. "Collusion and Price Rigidity," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 317-349.
    2. Domenico Marchetti, 2002. "Markups and the Business Cycle: Evidence from Italian Manufacturing Branches," Open Economies Review, Springer, vol. 13(1), pages 87-103, January.
    3. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2006. "Price and wage setting in an integrating Europe : firm level evidence," Working Paper Research 93, National Bank of Belgium.
    4. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    6. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-855, December.
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    Citations

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    Cited by:

    1. Katarzyna Budnik & Michal Greszta & Michal Hulej & Marcin Kolasa & Karol Murawski & Michal Rot & Bartosz Rybaczyk & Magdalena Tarnicka, 2009. "The new macroeconometric model of the Polish economy," NBP Working Papers 62, Narodowy Bank Polski, Economic Research Department.
    2. Martin Feldkircher & Reiner Martin & Julia Wörz, 2010. "Measuring Competition in CESEE: Stylized Facts and Determinants across Countries and Sectors," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 38-62.
    3. Jan Hagemejer & Michal Gradzewicz & Zbigniew Zolkiewski, "undated". "Globalization and the Polish Economy: Some Stylized Facts and CGE Model Simulations," EcoMod2007 23900033, EcoMod.

    More about this item

    Keywords

    markups; microeconometrics; microeconomics; monopoly power;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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