Understanding Market Power: Insights from Firm-Level Data on Markups and Profitability in the EU

Using firm-level financial statements, this paper provides the first joint assessment of markups, fixed costs, and profitability in the EU, documenting broadly stable market power and contained profitability over 2007-2022.

Highlights

• Stable EU markups: The aggregate EU markup fluctuates within a narrow 1.15–1.30 range over 2007–2022.
• Within-firm dynamics, not reallocation: The modest markup increases are driven by markup changes in existing firms, rather than by market share reallocation or firm entry/exit.
• Contained profitability net of fixed costs: The bulk of the price-cost margin is used by firms to cover fixed costs, with the profit rate in the EU fluctuating in the narrow range of 3-5% of total revenue. 
• Heterogeneity by firm type: Large, publicly traded, and high-tech firms show notably higher markups and profitability, likely reflecting the advantage of operating at a bigger scale.

Information and identifiers

Discussion Paper 257. July 2026. Brussels. PDF. 58pp. Tab. Graph. Bibliogr. Free.

KC-01-26-057-EN-N (online)
ISBN 978-92-68-40200-9 (online)  
ISSN 2443-8022 (online)
doi:10.2765/3811418 (online) 

JEL classification: D22, D24, L16, O52.

Disclaimer

European Economy Discussion Papers are written by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs, or by experts working in association with them, to inform discussion on economic policy and to stimulate debate. The views expressed in this paper are solely those of the author(s) and should not be considered as representative of the European Commission’s official position.