Product and Labor Market Imperfections and Scale Economies: Micro-evidence on France, Japan and the Netherlands

Allowing for three labor market settings, this paper relies on an extension of Hall's econometric framework for simultaneously estimating price-cost mark-ups and scale economies. Using an unbalanced panel of 17,653 firms over the period 1986-2001 in France, 8,725 firms over the period 1994-2006 in Japan, and 7,828 firms over the period 1993-2008 in the Netherlands, we first classify 30 comparable manufacturing industries in six distinct regimes that differ in terms of the type of competition prevailing in product and labor markets. For each of the three predominant regimes in each country, we then investigate industry differences in the estimated product and labor market imperfections and scale economies. We not only find important regime differences across the three countries, but also observe cross-country differences in the levels of product and labor market imperfections and scale economies within a particular regime.