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Competition in the portuguese economy: Estimated price-cost margins under imperfect labour markets

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  • Ana Cristina Soares
  • João Amador

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 ortuguese economy is approximately 13 per cent, without a clear istinction between tradable and non-tradable sectors. Finally, workers’ bargaining power is highly and positively correlated with price-cost margins across markets.

Suggested Citation

  • Ana Cristina Soares & João Amador, 2013. "Competition in the portuguese economy: Estimated price-cost margins under imperfect labour markets," Working Papers w201308, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201308
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    Cited by:

    1. Chrysovalantis Amountzias, 2018. "The Effects of Competition, Liquidity and Exports on Markups: Evidence from the UK Food and Beverages Sector," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 187-208, June.
    2. Daniel A. Dias & Carlos Robalo Marques & Christine Richmond, 2020. "A Tale of Two Sectors: Why is Misallocation Higher in Services than in Manufacturing?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 361-393, June.
    3. Ana Cristina Soares & João Amador, 2013. "Competition in the portuguese economy: Estimated price-cost margins under imperfect labour markets," Working Papers w201308, Banco de Portugal, Economics and Research Department.
    4. Paulo Bastos & Daniel A. Dias & Olga A. Timoshenko, 2018. "Learning, prices and firm dynamics," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1257-1311, November.
    5. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    6. Luis Folque, 2016. "Practical contribution for the assessment and monitoring of product market competition in the Portuguese Economy – estimation of price cost margins," GEE Papers 0063, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2016.
    7. João Amador & Arne J. Nagengast, 2015. "The Effect of Bank Shocks on Firm-Level and Aggregate Investment," Working Papers w201515, Banco de Portugal, Economics and Research Department.
    8. Cristina Fernández & Aitor Lacuesta & José Manuel Montero & Alberto Urtasun, 2015. "Heterogeneity of markups at the firm level and changes during the great recession: the case of spain," Working Papers 1536, Banco de España.
    9. Ana Gouveia & Sílvia Santos & Gustavo Monteiro, 2017. "Short-run effects of product markets’ deregulation: a more productive, more efficient and more resilient economy?," GEE Papers 0069, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Mar 2017.
    10. Carlos Robalo Marques & Daniel Dias & Christine Richmond, 2016. "Comparing misallocation between sectors in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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