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Institutions and concentration

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  • Mitton, Todd
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    Abstract

    In a new dataset of 1.3 million firms from over 100 countries, I establish a number of regularities in cross-country differences in economic concentration. Concentration of sales and employment is substantially higher in smaller countries and in less-developed countries; these two factors alone explain roughly half the cross-country variation in concentration. Nevertheless, a number of institutional factors offer additional explanatory power for concentration. Concentration is higher in countries with higher entry costs for new firms, in countries with weaker antitrust policy, in countries with less financial development, in countries with weaker rule of law, and in countries with more burdensome regulation. Weak institutions are associated with higher concentration especially in industries that do not have naturally high levels of concentration. In addition, the relationships between institutions and concentration are more pronounced in nontradable and investment-intensive industries, suggesting that natural barriers to competition facilitate the monopolization of sectors especially when institutions are weak.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 86 (2008)
    Issue (Month): 2 (June)
    Pages: 367-394

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    Handle: RePEc:eee:deveco:v:86:y:2008:i:2:p:367-394

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    Web page: http://www.elsevier.com/locate/devec

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    Cited by:
    1. Macchiavello, Rocco, 2010. "Vertical integration and investor protection in developing countries," Journal of Development Economics, Elsevier, vol. 93(2), pages 162-172, November.
    2. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.
    3. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    4. Ferro, Esteban & Portugal-Perez, Alberto & Wilson, John S., 2011. "Aid to the services sector : does it affect manufacturing exports ?," Policy Research Working Paper Series 5728, The World Bank.
    5. Olivier Cadot & Ana M. Fernandes & Julien Gourdon & Aaditya Mattoo, 2011. "Where to Spend the Next Million? Applying Impact Evaluation to Trade Assistance," World Bank Publications, The World Bank, number 16358, October.

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