Thursday, April 12, 2018

The Fall and Rise of Market Power in Europe

John P. Weche, Monopolies Commission, and Achim Wambach, Centre for European Economic Research (ZEW) describe The Fall and Rise of Market Power in Europe.

ABSTRACT: This paper presents an analysis of the recent developments of average market power in Europe by using a broad firm-level database for EU member states. To indicate competitive pressure at the firm-level, markups are estimated following De Loecker (2011), and De Loecker and Warzynski (2012). The analysis reveals a sharp drop in markups during the crisis, followed by a post-crisis increase. The European average has not yet reached its pre-crisis level, which is in contrast to results for the US, where average markups have climbed to pre-crisis levels already in 2011. There is significant heterogeneity among European economies and the pre-crisis levels do have been exceeded in some countries.

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