Applications of SCALES' sector model on competition MOCO
Competition policy is an important field of economic policy. We use a model on competition, developed by EIM, to analyse the contribution of competition to sector performance. This model, called MOCO, distinguishes between two exogenous competition variables: turbulence and concentration. It also distinguishes between two endogenous competition variables: the export share in total sales and the share of competing imports in total domestic demand. The competition variables influence prices and productivity directly but also indirectly, through the effect of productivity on prices, and vice versa. We distinguish between two sectors: manufacturing and services. We investigate two periods: 1988-1999 and 2000-2012. For the 2000-2012 period, we use a competition scenario. In the short term, the increased competition in these periods implies an increase in labour productivity growth and real value added growth and a decrease in factor and product prices. This is the case for both sectors. The net profit margin increased in services but decreased in manufacturing, while employment growth increased in manufacturing but decreased in services. In the medium term, the effect of increased competition on employment becomes negative in manufacturing as well.