Estimation of price-cost margins for Portuguese firms: a contribution for the assessment and monitoring of product market competition

Abstract

This work project estimates price-cost margins for 163 Portuguese markets (defined at 3-digit level of CAE), with the aim of assessing the degree of product market competition. During the Economic and Financial Assistance Program of 2011-14, a set of product market reforms was implemented, with the objective of increasing competition in output markets. We provide a first assessment of the effectiveness of these reforms. We use Portuguese firm-level data to estimate price-cost margins, allowing for worker’s bargaining power. By then aggregating markets into sectors, our results allow us to conclude that the degree of competition did increase in most sectors.