MEASURING MARKET COMPETITION IN THE EU ... - Bank of Valletta

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Measuring Market Competition in the EU: The Mark-up Approach a 5 per cent confidence interval for each country. The estimated mark-ups range from a high of around 1.46 (Cyprus) to low of 1.22 (Switzerland). It can be noted that most of the estimated values are around the values of 1.25 to 1.35. The estimated value for Malta was 1.32 with a 5% interval of 1.28 to 1.34. Such a value is relatively high, ranking the sixth highest among the countries analysed. Only Cyprus, Lithuania, Italy, Latvia, and Poland had higher scores. Looking at estimates for the whole economy can conceal the possible level of competition within sectors as scores for different sectors in an economy can cancel each other. Hence, useful insight can be obtained by digging further down and calculating mark-up levels at more disaggregated levels. Figure 2 presents the mark-up ratiosfor the 15 main economy activities. Figure 2 also serves to summaries information with regards the median, minimum and maximum values for each economy at each sector. As can be noted, the mark-up for Malta is relatively high for four out of the fifteen sectors under consideration. Particularly high mark-ups are noted for the Financial Intermediation sector, the Real Estate and Renting sector, the Wholesale and Retail sector, and the Other Community Services. Figure 1 Cross Country Comparisons of Mark-up Estimates 25
Mario Borg 26 Figure 2 Mark-up Across Economic Activities It is noteworthy that these particular sectors are important sources of intermediate inputs in other sectors of the economy. This might have significant ‘knock-down effects’ on the economy. A more in depth analysis of the mark-ups presents some interesting findings. Sectors which exhibit relatively high mark-ups are agriculture, fishing, publishing and printing, manufacturing of furniture, sales and maintenance of vehicles and auto parts, hotel and restaurant services, and real estate. On the other hand, low mark-ups are associated with most of the manufacturing activities, especially those export oriented. The high estimates for some of the sectors might be surprising, but it must be kept in mind that the period under consideration relates to the 1995 to 2005 period, and thus recent reforms and liberalisation measures are not fully captured. Some Stylised Observations This section will outline some stylised results that emerged from the sanalysis so far. Unsurprisingly, the results reject the hypothesis of perfect
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MEASURING MARKET COMPETITION IN THE EU ... - Bank of Valletta

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