MEASURING MARKET POWER IN THE SINGAPORE ECONOMY

Abstract

This paper examines the Singapore economy for possible market power. A representative sample of the economy consisting of six sectors of Singapore's manufacturing industry is utilized. The Three-Stage-Least Squares (3SLS) method is applied to an adapted version of Hall's model to measure the markup. It is found that substantial market power exists for three sectors of the manufacturing industry. The basic model is then extended to test the cyclical behaviour of the markup. The relationship between the markup and its export competitiveness, a unique feature of the economy is also examined. The markup is found to exhibit a counter-cyclical pattern, which was unexpected. This aspect of the economy clearly deserves further investigation in future studies.