Has the EU's Single Market Programme Fostered Competition? Testing for a Decrease in Mark‐up Ratios in EU Industries*

We use a panel approach, covering 10 EU Member States over the period 1981–99, for each of three major industry groups (manufacturing, construction and services) and 18 more detailed industries to test whether the EU's Single Market Programme has led to a reduction in firms’ mark‐ups over marginal costs. We address explicitly the uncertainty with respect to the timing of the changeover and allow for a possibly continuous regime shift in a smooth transition analysis. Where regime shifts can be found, the velocity of transition is extremely high, making the linear model a justifiable approximation. We also test for discrete structural breaks in the time window from 1986 to 1996, taking up endogeneity concerns in a generalized method of moments framework. Mark‐up reductions are found for aggregate manufacturing (although it is also suggested that mark‐ups increased in some manufacturing industries in the precompletion period at the end of the 1980s) and also for construction. In contrast, mark‐ups have gone up in most service industries since the early 1990s, which confirms the weak state of the Single Market for services and suggests that anti‐competitive defence strategies have emerged in EU service industries.     

I. Allgemeine wirstchaftslehre

Ohne Zusammenfassung     

The North American trade region

The North American Free Trade Agreement (NAFTA) that is to take effect at the beginning of 1994 will create a free trade area between three economies which differ substantially in terms of size and stage of development. What were the reasons that led the unequal partners, the USA, Canada and Mexico, to enter into closer trade integration? What will be the economic consequences for the countries involved and for world trade?