Impact of Competition and Business Cycles on the Behaviour of Monopolistic Markups in the Polish Economy

Bank i Kredyt, p. 11-27, March 2007

17 Pages Posted: 16 Aug 2007

See all articles by Michal Gradzewicz

Michal Gradzewicz

National Bank of Poland

Jan Hagemejer

National Bank of Poland; University of Warsaw - Faculty of Economic Sciences

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.

Keywords: markups, firm-level analysis, competition, business cycle

JEL Classification: L11, D43

Suggested Citation

Gradzewicz, Michal and Hagemejer, Jan, Impact of Competition and Business Cycles on the Behaviour of Monopolistic Markups in the Polish Economy. Available at SSRN: https://ssrn.com/abstract=1007431

Michal Gradzewicz (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Jan Hagemejer

National Bank of Poland ( email )

00-919 Warsaw
Poland

University of Warsaw - Faculty of Economic Sciences ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland

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