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
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: Suggested Citation