Competition in the Portuguese Economy: Insights from a profit elasticity approach

This article takes the set of Portuguese markets and computes a new competition measure suggested by Boone (2008), which draws on the concept of profit elasticity to marginal costs in a given market. The article concludes that the majority of markets presented a reduction in competition in the period 2000-2009, though there is substantial heterogeneity. In addition, markets that faced competition reductions represent the large majority of sales, gross value added and employment in the Portuguese economy. The non-tradable sector presents lower competition intensity than the tradable sector. Moreover, reductions in competition are relatively widespread across markets in both sectors, but in terms of sales, gross value added and employment these reductions are more substantial in the non-tradable. In the majority of markets the assessment on the evolution of competition using profit elasticities is similar to that obtained with classical competition indicators.