May It Be a Little Bit More of Market Power? On Productivity Growth and Competition

Abstract

In its heart, competition represents an important driver of productivity growth that has slowed in European countries since the financial crisis. This study examines the non-linear relationship between productivity growth and market power, using data on Central European manufacturing firms, from 2009 to 2017. The results show concave relationships between both variables, and that firms in competitive industries respond more sensitively to market power. This study contributes to the literature by applying not only the standard firm-level measure of Lerner indexes, but also by calculating them from production functions and checking robustness with country-industry-level concentration measures.