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Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data
Author(s) -
Klette Tor Jakob
Publication year - 1999
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00108
Subject(s) - productivity , economies of scale , economics , panel data , market power , estimation , marginal cost , econometrics , scale (ratio) , capital (architecture) , manufacturing , industrial organization , macroeconomics , microeconomics , business , geography , marketing , monopoly , management , archaeology , cartography
This paper presents a new econometric framework that permits simultaneous estimation of price‐cost margins, scale economies and productivity from a panel of establishment data. The model contains only a few, economically interesting parameters to be estimated, but it is nevertheless consistent with a flexible (translog) underlying technology, quasi‐fixed capital and the presence of persistent differences in productivity between establishments. The framework is applied to study market power, scale economies and productivity differences in a number of manufacturing industries in Norway. The results reveal statistically significant, but quite small, margins between price and marginal costs in most manufacturing industries.