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Measuring market power in the Greek manufacturing and services industries

Michael Polemis ()

International Review of Applied Economics, 2014, vol. 28, issue 6, 742-766

Abstract: This paper investigates the level of market power in the Greek manufacturing and services industry over the period 1970-2007. Based on the Roeger methodology, we investigate the competitive conditions in the examined industries at a disaggregated level (two and three digit ISIC codes). The empirical results indicate that the Greek manufacturing and services industries operate in non-competitive conditions. Moreover, average mark-up ratios are heterogeneous across sectors, with manufacturing having higher mark ups on average than services. In contrast to other related studies, we provide sufficient evidence about the movements of mark-up ratios over time. According to our findings, the mark-up ratios in the manufacturing sectors are, on average, higher in the post European Union (EU) accession period (1982-1992), as a result of the merger wave in the manufacturing industry. However, this upward trend stopped within the period (1993-2007), and the relevant ratios have decreased substantially. The econometric results are quite robust when the Two Stage Least Squares (2SLS) and the bootstrap method are applied. Lastly, the results of our analysis have a number of interesting implications for policy makers and government officials in light of the recent financial crisis that hit Greece.

Date: 2014
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