Evolution of price-cost margins during the troika intervention

Carlos Figueira () and Ricardo Pinheiro-Alves
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Carlos Figueira: Banco de Portugal

Portuguese Economic Journal, 2023, vol. 22, issue 3, No 1, 315-351

Abstract: Abstract Market competition is a key driver for an efficient allocation of resources and thus to sustained economic growth and higher aggregate welfare. Portugal implemented significant policy reforms during the difficult period 2010-2016 to improve the level of competition and flexibility in the product and labour markets. This paper measures price-cost margins in 190 markets during these years and the results present a stability pattern while providing evidence of imperfectly competitive markets. This seems to indicate that both the market power of firms and competition did not improve significantly during the period, although there was a reduction in the mark-ups of some non-manufacturing sectors, such as construction and other services. In addition, there was a sizeable decrease of the estimated parameter for labour market frictions in some services sectors, which may be interpreted as the policy reforms leading to a reduction in their workers’ bargaining power.

Keywords: Competition; Price-cost margins; Bargaining power; Market power; D40; J50; L11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10258-022-00221-2

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