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Market Concentration in Europe: Evidence from Antitrust Markets

Author

Listed:
  • Pauline Affeldt
  • Tomaso Duso
  • Klaus Gugler
  • Joanna Piechucka
Abstract
An increasing body of empirical evidence is documenting trends toward rising concentration, profits, and markups in many industries around the world since the 1980s. Two major criticisms of these studies is that concentration and market shares are poorly measured at the national industry level while firm level revenues are a poor indicator of product sales. We use a novel database that identifies over 20,000 product/geographic antitrust markets affected by over2,000 mergers scrutinized by the European Commission between 1995 and 2014. We show that concentration, as measured by the market-specific post-merger HHI, is larger than reported in the extant literature (at least) by a factor of ten. We also show that concentration has increased over time on average. Yet, there is a great deal of heterogeneity across geographic markets and within broader industries. In a regression analysis that exploits this within-industry variation, we show that barriers to entry are unambiguously positively related to concentration irrespective of time periods, sectors of activity, and geographical market dimension analyzed. Strict past merger enforcement negatively correlates with concentration. Yet, this effect is stronger in the earlier decade (1995-2004) than subsequently. Intangibility of investments consistently displays positive correlation with concentration only for EU wide and worldwide services markets. In contrast, the correlation is negative in national markets. This underscores the importance of the large heterogeneity present in concentration developments across markets.

Suggested Citation

  • Pauline Affeldt & Tomaso Duso & Klaus Gugler & Joanna Piechucka, 2021. "Market Concentration in Europe: Evidence from Antitrust Markets," Discussion Papers of DIW Berlin 1930, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1930
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vaziri, M., 2022. "Antitrust Law and Business Dynamism," Cambridge Working Papers in Economics 2243, Faculty of Economics, University of Cambridge.
    2. Bajgar, Matej & Berlingieri, Giuseppe & Calligaris, Sara & Criscuolo, Chiara & Timmis, Jonathan, 2019. "Industry concentration in Europe and North America," LSE Research Online Documents on Economics 103427, London School of Economics and Political Science, LSE Library.
    3. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    4. Kwon, Spencer Y. & Ma, Yueran & Zimmermann, Kaspar, 2022. "100 years of rising corporate concentration," SAFE Working Paper Series 359, Leibniz Institute for Financial Research SAFE.
    5. Babina, Tania & Barkai, Simcha & Jeffers, Jessica & Karger, Ezra & Volkova, Ekaterina, 2023. "Antitrust Enforcement Increases Economic Activity," HEC Research Papers Series 1488, HEC Paris.
    6. Budzinski, Oliver & Stöhr, Annika, 2023. "Wettbewerb und Nachhaltigkeit in Deutschland und der EU: Ökonomische Einschätzung der Studie im Auftrag des Bundesministeriums für Wirtschaft und Klimaschutz," Ilmenau Economics Discussion Papers 179, Ilmenau University of Technology, Institute of Economics.
    7. Peter Josef Stauvermann & Ronald Ravinesh Kumar, 2023. "Production Efficiency and Income Distribution with Competition Induced by Antitrust Measures," JRFM, MDPI, vol. 16(9), pages 1-23, September.
    8. Budzinski, Oliver & Stöhr, Annika, 2023. "Energieversorgungssicherheit als Gemeinwohl: Auswirkungen des Instrumentes Ministererlaubnis," Ilmenau Economics Discussion Papers 177, Ilmenau University of Technology, Institute of Economics.
    9. Affeldt, Pauline & Duso, Tomaso & Szücs, Florian, 2021. "25 years of European merger control," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 76, pages 1-62.
    10. Gábor Koltay & Szabolcs Lorncz & Tommaso M. Valletti, 2022. "Concentration and Competition: Evidence from Europe and Implications for Policy," CESifo Working Paper Series 9640, CESifo.

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    More about this item

    Keywords

    Concentration; HHI; market definition; entry barriers; mergers; merger control; intangibles;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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