Increasing Prices, Declining Productivity, higher Markups? – Analysis of Market Conditions in the Construction Industry

The project examines the development of markups in the construction sector against the backdrop of existing strucutral issues and the planned public investment initiative amounting to €500 billion. Inter alia, construction prices have increased significantly more strongly than overall consumer prices since 2010, while labor productivity has declined markedly over the same period.

This opposing development contradicts the implications of a largely competitive market and points to market imperfections or structural rigidities. Potential explanatory factors considered include market power, excess demand combined with input rigidities, and labor market–related shortages.

The evolution of markups and productivity provides insights into which of the theoretically plausible explanations is most likely. This, in turn, has important implications for the effectiveness of the planned investment programs.