Is the price-cost margin affected by the market concentration? Evidence from the Czech food and beverages industry

Abstract

The paper investigates the relationship between the market concentration and the price-cost margin in the Czech food processing industry during 2003-2014. Estimated econometric models with Fixed Effects supported hypothesis assuming the positive impact of the market concentration on the price-cost margin controlling for productivity. The increase in the productivity was associated with the increase of the pricecost margins. Based on the results, policy makers should promote market competition in the food processing industry, for example through the reduction of entry barriers. Another option worth consideration is to support R&D activities potentially leading to market transformation and increase in efficiency.

Market concentration and profitability: the empirical evidence from Serbian manufacturing industry

“…Employing two-stage least squares methodology, Stiegert (2009) found a positive relationship between market concentration and profitability. Similar results were obtained by Pervan and Mlikota (2013) in the case of Croatia using a dynamic panel methodology and Blažková and Dvouletý (2017) for Czech Republic using a static panel methodology. Insignificant results were found by a cross-sectional research in the case of wine industry of Canada (Outreville, 2015).…”

Assessing the microeconomic effects of public subsidies on the performance of firms in the czech food processing industry: A counterfactual impact evaluation

“…On the contrary, the sector CZ‐NACE 101 (i.e., meat processing) with a large number of very small processors, a broad range of production and laboriousness is one of the least profitable Czech food sectors in the long run. The sector's situation is furthermore worsened due to increasing imports—while in 2003 import penetration ranged around 10% of domestic demand in this sector, since 2012, it has been over 40% (as reported by Blažková & Chmelíková, ).…”

Sectoral and Firm-Level Determinants of Profitability: A Multilevel Approach

“…Hirsch & Schiefer, 2016;Goddard et al, 2009;Claver et al, 2002) showing that the effects of firm-specific factors are more important (they explained around 50% of variability in firm performance) than the effects of sectoral factors (which explained only about 0.3% of variability in firm performance). Although other studies have separately investigated the role of firm-level determinants on firm performance (Blažková & Dvouletý, 2018a) and the role of sectoral variables affecting performance in the whole sector (Blažková & Dvouletý (2017a;2017b), there is no study in the Czech environment that would combine both types of determinants (sectoral and firm) in one complex analysis.…”

“…All variables used in the analysis as determinants of profitability were selected based on the availability of data and based on the previous literature (e.g. Brealey et al, 2017;Hirsch et al, 2014;Blažková & Dvouletý, 2017a, 2017b, 2018a. Since the firm performance is influenced by the competitive environment on the market, market concentration ratio (CR4 j ) was used to reflect the level of imperfect competition on the Czech food market.…”