Abstract
The empirical aspects of the classical theory of competition are examined as well as the extent to which a central proposition or economic law of the classical theory of competition, that is, the inter-industry equalization of profit rates, is confirmed. The discussion extends to include important issues of classical competition, such as the presence of monopoly in actual economies and whether or not phenomena usually attributed to monopoly and its power over market forces may have an explanation based on the classical theory of competition. The empirical research refers to the Greek economy, continues with the Japanese and ends with the US economy. Empirical results corroborate the classical theory of competition and the tendential equalization of inter-industry profit rates and rule out the case of monopoly and its power over market forces.
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Notes
- 1.
For instance, Droucopoulos (1991, p. 117), although he noted that between the years 1978 and 1984 the degree of concentration in most industries declined, nevertheless he concluded that the oligopolistic nature of the Greek manufacturing continued; such a conclusion shows that he was influenced by the antimonopoly stance of the socialist-oriented economists of that period. Returning on the same issue, Droucopoulos and Papadogonas (2000) using detailed data sets argued that the degree of concentration of Greek large-scale (that is, establishments operating with at least ten workers) industry for the years 1989 to 1992 has not changed substantially.
- 2.
Since then, there are no relevant industry censuses either because the Statistical Services are reluctant to provide estimates for the politically sensitive ratio (the Greek Statistical Service is no exception) or because of the constantly decreasing importance of the share of manufacturing in GDP and total employment. Consequently, it is not possible to continue a cross-section analysis based on data from the Greek Statistical Service. We report, however, the concentration index of the year 1978 in order to show that the changes in the degree of concentration of the large-scale Greek industries are rather slow. Unfortunately, there are no more recent censuses.
- 3.
- 4.
For simplicity reasons, we do not include in the presentation the superscripts i defining the industry under study.
- 5.
About the exact statistical properties, see Tsoulfidis and Tsaliki (2013).
- 6.
For more see Tsaliki and Tsoulfidis (2016).
- 7.
- 8.
In econometric terms, the time series data does not display any known systematic functional form such as ARCH or GARCH.
- 9.
In addition, for the calculation of the stock of the circulating capital, we need to obtain data on the turnover time of production, data which are hard to get.
- 10.
In fact, the obtained results from the usual Augmented Dickey-Fuller (ADF) tests (not shown) are mixed and more likely are contaminated by the presence of nonlinearities not captured by the test. In fact the ADF test assumes that the deviation series of profit rates exhibit linear movements.
- 11.
When we ran regressions of differences of these two series, we found that the intercept and the slope coefficients of the regressions are not statistically different from zero, whereas the R-squared is near zero.
- 12.
If industries 30 and 34 are nonstationary, it follows that the AR(1) scheme cannot be applied; on the other hand, by differencing the data of these two industries, they become stationary but, at the same time, with no economic meaning.
- 13.
See Mueller (1990) for relevant studies about time series data from many countries and results suggesting that the deviations of profit rates from the economy-wide average persist lending support to the idea of the presence of monopolistic characteristics.
- 14.
For data details see Industrial Productivity Database http://www.rieti.go.jp/en/database/JIP2011/.
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Tsoulfidis, L., Tsaliki, P. (2019). Real Competition and Empirical Evidence. In: Classical Political Economics and Modern Capitalism. Springer, Cham. https://doi.org/10.1007/978-3-030-17967-0_6
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