Competition and power imbalances in the food chain are under increased scrutiny from policy makers. We assess the competitive conditions in the EU food sector, using firm-level accounting data to examine firm size distributions and market concentration (for 10 countries), and production-function-derived markups (for 7 countries) for food manufacturing, retail, and wholesale industries. Key findings include the following: (i) most firms are small, but larger firms generate most turnover; (ii) concentration is notable in certain subsectors (25% of retail/wholesale and 50% manufacturing subsectors); (iii) the correlation between turnover size, markups, and concentration at subsector level is weak. We discuss the implications for the use of turnover-based classification in the EU policy initiative on unfair trading practices.

This paper addresses the role of markup variations in the transmission process of cross-sectoral productivity differential shocks and government spending shocks to the relative price of nontradables. The Balassa-Samuelson model based on frictionless goods markets predicts that a rise in the sectoral productivity ratio by 1% raises the relative price by 1% while government spending changes leave the relative price unaffected. Using panel cointegration and unit root tests applied to a panel of fifteen OECD economies, our empirical evidence does not support these implications. We find that a rise in relative productivity by 1% raises the relative price of nontradables by only 0.70% and that an increase in government spending by 1% of GDP drives up the relative price by around 1%. This paper shows that these items of evidence can be successfully explained by a two-sector open economy model in which variations in the composition of demand for nontradables give rise to endogenous changes in the markups.

In this paper we assess the effects of increasing competition in the service sector in one country of the euro area. We focus on Italy, which, based on cross-country comparisons, stands out as the country with the highest markups in nonmanufacturing industries among the OECD countries. We propose a two-region (Italy and the rest of the euro area) dynamic stochastic general equilibrium model where we introduce nontradable goods as a proxy for services and we allow for monopolistic competition in labor, manufacturing, and services markets. We then use the model to simulate the macroeconomic and spillover effects of increasing the degree of competition in the Italian services sector. According to the results, reducing the markups in services to the levels prevailing in the rest of the euro area induces in the long run an increase in Italian GDP equal to 11% and an increase in welfare (measured in terms of steady state consumption equivalents) of about 3.5%. Half of the GDP increase would be realized in the first three years. The spillover effects to the rest of the euro area are limited: consumption, investment, and GDP increases are relatively small.

This paper investigates the effects of introducing imperfect competition in an international business-cycle model. We provide some international evidence on markups and analyze the implications of increasing returns to scale and monopolistic competition for the effects and the international transmission of technology and government spending shocks. We also consider exogenous markup fluctuations as a source of shocks and of transmission of business cycles. We show that imperfect competition improves the behavior of a standard model driven by technology shocks, although the behavior of foreign trade variables remains unexplained. We also show that an imperfectly competitive model driven by government shocks can explain the international business cycle at least as well as a model driven by technology shocks.