Edited by Adriaan Dierx, Fabienne Ilzkovitz and Khalid Sekkat
Chapter 4: Industrial concentration, market integration and effi ciency in the European Union
4. Industrial concentration, market integration and efﬁciency in the European Union Reinhilde Veugelers* 4.1 THE IMPACT OF MARKET INTEGRATION ON INDUSTRY CONCENTRATION During the last decade markets have become increasingly globalised and national production systems more and more globally integrated. Many elements have positively inﬂuenced the level of industry globalisation during the late 1980s and 1990s, such as convergence in demand, advances in transportation and globalisation of business services, to name a few (Yip, 1995). In this process of world market integration, the formation of regional economic blocs such as the EU has played an important role. Regional market integration within the EU was critically inﬂuenced by the 1992 Single Market Programme (SMP), and further strengthened by monetary integration. The process of market integration systematically changes the nature of competition, and therefore the structure and performance of industries and ﬁrms. Following Smith and Venables (1988), market integration can be seen as (i) a reduction in trade costs between national markets, and/or (ii) a complete displacement of segmented national markets by a single aggregate market (in which price discrimination is no longer possible). The beneﬁcial effects of market integration on the EU economy come from lower prices and increased production. Ampliﬁed competitive pressure is an important catalyst for beneﬁcial effects, not only directly, by reducing market power, but also indirectly, by eliminating cost inefﬁciencies. Hence, a cornerstone in the evaluation of market integration is the effect on competition and market concentration. Within the academic...