Product Market Competition, Productivity, and Jobs : The Case of South Africa
The degree of concentration and market power in South African markets has been the topic of much policy discussion. However, there has been little evidence on what drives market power and the impact of the degree of competition in South African mar...
| Main Authors: | , , |
|---|---|
| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/515591576592941445/Product-Market-Competition-Productivity-and-Jobs-The-Case-of-South-Africa http://hdl.handle.net/10986/33053 |
| Summary: | The degree of concentration and market
power in South African markets has been the topic of much
policy discussion. However, there has been little evidence
on what drives market power and the impact of the degree of
competition in South African markets on economic outcomes.
This paper improves on previous markup estimates for South
Africa using a methodology developed by De Loecker and
Warzynski (2012) applied to tax administrative data for
2010–14. The paper then explores the firm-level determinants
of the estimated markups and assesses the link between
competition and firm-level outcomes, including productivity,
employment, and wages. The analysis finds that average
markups across the economy appear to have risen between 2010
and 2014. Larger firms, higher-intensity exporters, and
firms with greater sales shares charge higher markups than
comparator firms in South Africa, even after controlling for
efficiency. Moreover, lower product market competition has a
significant, negative effect on productivity growth,
employment growth, and wage growth in South African
manufacturing industries. Higher sales-weighted and
value-added-weighted average industry-level markups are
associated with lower industry-level entry rates. The
findings highlight the importance of implementing sound
pro-competition government interventions and the significant
economic benefits associated with such policies. |
|---|