Monitoring of Markets and Sectors MMS Project Final Report

The AGORA-MMS project "Monitoring of Markets and Sectors" was initiated by the division Sector and Market Monitoring within the Federal Public Service Economy (FPS Economy in the sequel). It has been realised in collaboration with the Hogeschool-Universiteit Brussel and the KULeuven and financed by the federal Science Policy department.

The overall mission of the FPS Economy consists of creating the necessary conditions for the competitive, sustainable and balanced functioning of the goods and services markets. The division Sector and Market Monitoring plays a key role in achieving this mission in two ways.

First, the division is in charge of the Price Observatory, i.e. the Belgian public price monitoring authority, within the Institute for National Accounts.

Second, the monitoring division performs analyses at sector level for the FPS Economy. One of the strategies to achieve the mission is to “identify economic sectors and markets that show signals of suboptimal functioning, looking for the causes of these dysfunctions and suggesting solutions”. The term “suboptimal functioning” should be understood here in a very broad sense and is definitely broader than ensuring fair competition (in the narrow sense of competition policy) or monitoring price evolutions. The EU adopted a similar evidence-based sector monitoring strategy for its Single Market Review in 2007.

The AGORA-MMS project contributes to the sector monitoring objective of the division Sector and Market Monitoring of the FPS Economy by proposing and implementing several methodologies to analyze sectors from different perspectives, taking into account multiple indicators that are calculated on the basis of the rich datasets the FPS Economy has access to.

Being part of the overall AGORA program of the Belgian Federal Science Policy, the MMS project aims to leverage public data sources. These include data sources available through the Data Warehouse of the FPS Economy (via Statistics Belgium) coming either from own statistical surveys (like the Structural Business Survey and Prodcom) or from external sources like the annual company accounts and international trade data (both from the Belgian National Bank BNB), data on company turnover (from the VAT administration) and on employment (from the social security institutions). In addition, data on R&D expenditure were kindly provided by Federal Science Policy. Drawing upon this broad set of data sources that cover most of the Belgian economy, the MMS project has developed a range of different analysis techniques that can be applied on a recurring basis by the FPS Economy.

The main objectives of the AGORA-MMS project were (i) developing a methodological framework for the detection of market malfunctioning, (ii) identifying indicators to measure different aspects of market functioning, (iii) calculating these indicators using the rich set of databases the FPS Economy has access to, and (iv) constructing a composite indicator of market functioning based on these detailed indicators. The final product is a database which contains the individual indicator values and composite indicator scores for all the sectors, classified according to the NACE nomenclature.

In order to achieve these ambitious objectives, the AGORA-MMS researchers started with an extensive literature review and an analysis of sector screening tools that have been developed in other countries and at the level of the European Commission. In March 2010, the project team organized an international expert meeting in Brussels to learn from other experiences in this field and to propose its own concepts of market monitoring tools.

One of the main lessons from this workshop was that a unique and generally accepted methodology for screening sectors on market functioning does not exist. Complex cause-and-effect relationships and detailed sector conditions matter and complicate the task of developing a broad screening tool in a “one size fits all” way. Taking into account the conclusions of the expert workshop, the AGORA-MMS project has developed a multi-tier approach. The approach and its results were presented at a second international expert meeting in May 2011 in Brussels.