An Investigation of the Degree of Market Power in the Greek Manufacturing and Service Industries

Abstract

This paper investigates the degree of market power in the Greek manufacturing and service industries over the period 1970–2007. The markup model developed by Hall (1988) and Roeger (1995) is taken into consideration where market power is expressed as the difference between the selling price and the marginal cost of production. The analysis will be conducted in three steps; the first step estimates the price-cost margin of the manufacturing and services industries over 1970–2007; the second step applies the cross section specification under which the markup ratio is obtained for the 23 manufacturing and 26 service 2-digit ISIC sectors of the panel sample; and the third step estimates the price-cost margin of the manufacturing and services industries for each year over 1973–2007 by employing the Hall-Roeger time series specification. The empirical findings suggest that both industries exert a positive markup ratio; however, the service industry appears to be less competitive than the manufacturing industry.