Estimating Mark-ups and the Effect of Product Market Regulations in Selected Professional Services Sectors: A Firm-level Analysis

Summary:

In this paper we estimate mark-ups and their association with product market regulations (PMR) in professional services sectors using the Orbis firm-level database for 13 EU member states. We will concentrate on engineering and accounting. Results indicate a significant effect of PMR on mark-ups, which confirms findings based on sectoral data (cf. Thum-Thysen and Canton, 2015) but a more granular analysis on the firm level gives additional insights. Compared to estimates of mark-ups based on sectoral data, the mark-up levels in the two analysed sectors using firm-level data are found to be higher. This may be due to a more granular sectoral definition, only covering regulated professions, where firms can gain market power and charge higher mark-ups. The new empirical findings could be useful for the analytical work on estimating the impact of structural reforms.

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