Monopolistic Markups and Returns to Scale in Poland. Evidence from the Firms Level

This article estimates returns to scale and monopolistic markups on a large sample of firms in the manufacturing and services sectors during 1996 -2004. Methodology based on instrumental variables allows joint estimation of both, scale elasticities as well as markups, while the unobserved changes in firm-specific productivities are under control. Results show significant and positive markups in the aggregate manufacturing sector and in several narrowly defined industries. Returns to scale vary, but they are more pronounced in manufacturing, than in service sectors. Markups in service sector are lower than expected. Sensitivity analysis suggests sufficient overall stability of results.