Inference of Oligopoly Power with Limited Data: Manufacturing in Morocco

Researchers’ enthusiasm for estimating industry oligopoly power in developing countries is often not matched with availability of data. Even when available, datasets are often incomplete, inconsistent, too aggregated, and almost always collected by government agencies for purposes different from those of the researcher. This paper demonstrates how some of the theoretical restrictions implied by firm optimizing behavior can be used to specify and make inference about market power in a conjectural elasticity model when data availability is a problem. For illustration, we specify and make inference of market power in an empirical model of 7 manufacturing industries in Morocco. The model requires observations on only two variables likely to be found in most industry statistics collected for tax purposes by governments in developing countries: Sales revenue and payroll.