The competitive conditions in the OECD manufacturing industry

The goal of this study was to assess the intensity of competition in the OECD manufacturing industry by using the Panzar and Rosse index over the period 1970–2011. For this purpose, we use the fully modified OLS method and second-generation unit root analysis to investigate the level of competition across two-digit manufacturing sectors. The results are robust and consistent with similar studies, leading to the rejection of perfect collusion and perfect competition, while providing evidence in favour of monopolistic competition. Similarly to other empirical studies, H-statistics are shown to be heterogeneous across manufacturing sectors. We argue that more concentrated sectors such as food and beverages, motor vehicles and furniture have low levels of H-statistic being thus less competitive than other industries (i.e. computers transportation equipment, printing and chemicals), where the H-statistic is closer to unity. Lastly, our analysis will be a useful policy tool to achieve structural micro-economic goals.