September 21, 2006

Measuring competition in the Netherlands

In the 1990s policy makers took various measures to stimulate competition. This memorandum investigates the question in which direction competition in the Dutch market sector has changed. Four competition indicators are used.

These indicators are derived from a database of 87 000 firms as well as from the input-output tables of the National Accounts. Data availability limits the analysis to the period 1993-2001. Remarkably, the indicators do not suggest that competition increased economy-wide. All show that competition changes have been rather small in many industries, but a considerable number of industries experience a sharp rise or strong fall in competition. Nonetheless, the indicators frequently contradict each other on the change in competition at the industry level. These differences can partly be traced back to differences in their economic concepts. In theory, the indicators can differ, because they respond differently to a reallocation of output from inefficient to efficient firms. Econometric and statistical tests provide some but mainly insignificant evidence to support this hypothesis.



Harold Creusen
Bert Minne
Henry van der Wiel