Competition in the Finnish Private Service Sector in International Comparison
This study analyses whether the high consumer price level in Finland in relation to other EU countries can be explained by the lack of competition in the Finnish service sectors or by the lack of competitiveness or by other factors. Measuring competition by the price cost margin and by the Boone competition indicator shows that competition in the Finnish private service sectors is roughly equal to competition in other EU and OECD countries analysed in the study. The impact of foreign competition on private services is analysed by an econometric model based on the theory of imperfect competition. International competition is fairly severe in the Finnish water transport and air transport sectors in the sense that foreign competitors unit costs influence domestic output prices in these sectors more strongly in Finland than in most other OECD countries. The high consumer price level in Finland cannot be explained by the lack of competition in the Finnish service sectors. To some extent it can be explained by the lack of competitiveness in the service sectors. However, it turns out that the most important reasons for the high consumer price level in Finland in relation to other EU countries are the high level of housing prices and value added and other product tax rates in Finland.