Thursday, August 2, 2012
Posted by D. Daniel Sokol
Emanuele Forlani, Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) asks Competition in Services and Efficiency of Manufacturing Firms: Does 'Liberalization' Matter?
ABSTRACT: In developed economies, services form an increasing proportion of inputs employed by manufacturing firms. While downstream firms act in a very competitive environment, services often operate in protected or highly regulated markets. In this paper, I empirically investigate whether the degree of competition in services aff ects the efficiency of manufacturing firms through services production inputs. By using both fi rm and sector level data for France, through input-output analysis I show that variations in the upstream competition, especially in network industries, a ffect the average productivity level in manufacturing industry: an increase in average markups is associated with a reduction in manufacturing productivity. The fi ndings di ffer according to firms size and initial efficiency level: in the short run less efficient and small firms are relatively mostly harmed by an uncompetitive service sector.