International Journal of Industrial Organization 21 (2003) 1435–1459 www.elsevier.com / locate / econbase Competitive pressure and economic integration: an illustration for Spain, 1983–1996 Georges Siotis ´ Departamento de Economıa, Universidad Carlos III de Madrid, Calle Madrid 126, Getafe 28903, Spain Received 5 September 2000; received in revised form 24 May 2002; accepted 7 February 2003 Abstract This paper estimates sectoral mark-ups in the Spanish economy during the period 1983–1996. The data consists of a large firm level data set that encompasses all sectors of economic activity apart from financial institutions. The time period considered is well suited to assess the pro-competitive effect of economic integration, as Spain’s economy became fully integrated in the EU, which was itself embarking on a massive liberalisation exercise. I find that sectors most exposed to international competition witnessed a significant drop in margins, while those more sheltered from competitive pressures did not. Finally, comparing estimated mark-ups to accounting margins indicates that the latter are a reasonable proxy for margins obtained econometrically.  2003 Elsevier B.V. All rights reserved. JEL classification: L13; L4; L6 Keywords: Mark-ups; Economic integration; Instrumental variables; GMM 1. Introduction An idea often put forward is that, compared to traditional Vinerian effects, the principal outcome stemming from the removal of trade barriers is to sharpen competitive pressure (see, among others, Baldwin et al., 1992; Allen et al., 1998). E-mail address: siotis@eco.uc3m.es (G. Siotis). 0167-7187 / 03 / $ – see front matter  2003 Elsevier B.V. All rights reserved. doi:10.1016 / S0167-7187(03)00051-1