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Measurement of market power for the environmentally regulated Korean iron and steel manufacturing industry

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  • Lee, Myunghun
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    Abstract

    For industries in which where market prices of certain inputs are not available, measuring the degree of market power by using the markup over the marginal market cost may be inappropriate. With regard to the Korean iron and steel manufacturing industry, which is subject to environmental regulations, the calculation of the price of abatement capital is hindered by a lack of relevant data. To increase the reliability of market power markups, this paper estimates the restricted cost function in which abatement capital is assumed to be quasi-fixed at an optimal level and the supply relation. The degree of market power for the industry, measured as the ratio of the estimated market power markup to the supply price, was estimated to be 0.54 on average between 1982 and 2001. The results indicate that ignoring environmental regulations can overstate the degree of market power by approximately 12%.

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    Bibliographic Info

    Article provided by Elsevier in its journal Resources Policy.

    Volume (Year): 36 (2011)
    Issue (Month): 3 (September)
    Pages: 249-254

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    Handle: RePEc:eee:jrpoli:v:36:y:2011:i:3:p:249-254

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    Web page: http://www.elsevier.com/locate/inca/30467

    Related research

    Keywords: Market power markup Pollution abatement capital Restricted cost function Supply relation Steel manufacturing industry;

    References

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    1. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
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    Cited by:
    1. Lee, Myunghun, 2013. "The effects of an increase in power rate on energy demand and output price in Korean manufacturing sectors," Energy Policy, Elsevier, vol. 63(C), pages 1217-1223.

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