Concentration, Market Power and Dynamism in the Euro Area

68 Pages Posted: 26 Mar 2019

See all articles by Maria Chiara Cavalleri

Maria Chiara Cavalleri

Organization for Economic Co-Operation and Development (OECD)

Alice Eliet

European Central Bank (ECB)

Peter McAdam

European Central Bank (ECB); University of Surrey, Economics

Filippos Petroulakis

European Central Bank (ECB)

Ana Cristina Soares

Bank of Portugal

Isabel Vansteenkiste

European Central Bank (ECB)

Date Written: March 25, 2019

Abstract

We examine the degree of market power in the big four countries of the euro area using macro and firm micro data. We focus on three main indicators of market power in and across countries: namely, the concentration ratios, the markup and the degree of economic dynamism. For the macro database we use the sectoral data of KLEMs and for the micro data we use a combination of Orbis and iBACH (dating from 2006 onwards). We find that, in contrast to the situation in the US, market power metrics have been relatively stable over recent years and – in terms of the markup specifically – marginally trending down since the late 1990s, driven largely by Manufacturing. In terms of the debate as to the merits of market concentration, we find (relying on results for Manufacturing) that firms in sectors which exhibit high concentration, but are categorized as ‘high tech’ users, generally have higher TFP growth rates. By contrast, markups tend to display a bi-modal distribution when looked at through the lens of high concentration and high tech usage. These results would tend to confirm that the rise in market power documented for other economies is not obviously a euro area phenomenon and that welfare and policy analysis of market concentration is inevitably complex.

Keywords: Market Power, Euro Area, Micro-macro Data

JEL Classification: D2, D4, N1, O3

Suggested Citation

Cavalleri, Maria Chiara and Eliet, Alice and McAdam, Peter and Petroulakis, Filippos and Soares, Ana Cristina and Vansteenkiste, Isabel, Concentration, Market Power and Dynamism in the Euro Area (March 25, 2019). ECB Working Paper No. 2253 (2019); ISBN 978-92-899-3515-9 . Available at SSRN: https://ssrn.com/abstract=3360233

Maria Chiara Cavalleri (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Alice Eliet

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Peter McAdam

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Eurotower
D-60311 Frankfurt am Main
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

University of Surrey, Economics ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Filippos Petroulakis

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

HOME PAGE: http://sites.google.com/site/filippospetroulakis/

Ana Cristina Soares

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Isabel Vansteenkiste

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
185
PlumX Metrics