Market power and fiscal policy in OECD countries

Antonio Afonso and Luis Costa

Applied Economics, 2013, vol. 45, issue 32, 4545-4555

Abstract: We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.

Date: 2013
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Related works:
Working Paper: Market power and fiscal policy in OECD countries (2010)
Working Paper: Market Power and Fiscal Policy in OECD Countries (2010)
Working Paper: Market Power and Fiscal Policy in OECD Countries (2010)
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DOI: 10.1080/00036846.2013.795275

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