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Market Structure: Concentration and Imports as Determinants of Industry Margins

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Author Info
Alejandro Castañeda Sabido (El Colegio de México)
David Mulato (Universidad Torcuato di Tella)
Abstract

The paper analyzes the determinants of price-cost margins following traditional industrial organization approaches. The price-cost margins are made function of the concentration index, and the degree of import penetration. We find that imports act as a market disciplining device that reduces the price-cost margins of the domestic industry. After trade liberalization, the impact of concentration diminishes. Controlling for cyclical behavior of the price-cost margins the paper shows that cross-section studies tend to bias the estimates. A distinction between durables and non-durables is made, finding strong evidence for concentration to affect the price-cost margins of durables.

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File URL: http://revistas.colmex.mx/revistas/12/art_12_1137_8627.pdf
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Publisher Info
Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 21 (2006)
Issue (Month): 2 ()
Pages: 177-202
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Handle: RePEc:emx:esteco:v:21:y:2006:i:2:p:177-202

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Web page: http://www.colmex.mx/centros/cee/
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Related research
Keywords: price-cost margins; import penetration; concentration; cyclical effects;

Find related papers by JEL classification:
L00 - Industrial Organization - - General - - - General
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring. [Downloadable!] (restricted)
  3. Pugel, Thomas A, 1980. "Foreign Trade and US Market Performance," Journal of Industrial Economics, Blackwell Publishing, vol. 29(2), pages 119-29, December. [Downloadable!] (restricted)
  4. Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Oxford University Press, vol. 34(1), pages 43-56, January.
  5. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring. [Downloadable!] (restricted)
  6. Collins, Norman R & Preston, Lee E, 1969. "Price-Cost Margins and Industry Structure," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 271-86, August. [Downloadable!] (restricted)
  7. Robert E. Hall, 1988. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier. [Downloadable!] (restricted)
  9. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October. [Downloadable!] (restricted)
  10. Nelson, C. & Startz, R., 1988. "Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator," Discussion Papers in Economics at the University of Washington 88-06, Department of Economics at the University of Washington.
    Other versions:
  11. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June. [Downloadable!] (restricted)
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