Competition in the Portuguese Economy: Estimated Price-Cost Margins under Imperfect Labour Markets

31 Pages Posted: 18 Dec 2014

Date Written: December 9, 2014

Abstract

This article estimates price-cost margins for the Portuguese markets in a context of imperfect competition in the labour market. The database used includes virtually the universe of Portuguese firms for the period 2005-2009. The results strongly reject the hypothesis of perfect competition in both labour and product markets. Estimated price-cost margins are very heterogeneous across markets and the average for the overall economy ranges between 25 and 28 per cent, depending on the variables used to weight each market. In addition, the tradable sector presents a lower price-cost margin than the non-tradable sector. According to the methodology used, workers’ bargaining power in the Portuguese economy is approximately 13 per cent, without a clear distinction between tradable and non-tradable sectors. Finally, workers’ bargaining power is highly and positively correlated with price-cost margins across markets.

Keywords: market competition, Portuguese economy, production function

JEL Classification: L10, L60, O50

Suggested Citation

Amador, João and Soares, Ana Cristina, Competition in the Portuguese Economy: Estimated Price-Cost Margins under Imperfect Labour Markets (December 9, 2014). ECB Working Paper No. 1751, Available at SSRN: https://ssrn.com/abstract=2535749

João Amador (Contact Author)

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Ana Cristina Soares

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

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