IDEAS home Printed from https://ideas.repec.org/a/emx/esteco/v21y2006i2p177-202.html
   My bibliography  Save this article

Market Structure: Concentration and Imports as Determinants of Industry Margins

Author

Listed:
  • 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.

Suggested Citation

  • Alejandro Castañeda Sabido & David Mulato, 2006. "Market Structure: Concentration and Imports as Determinants of Industry Margins," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 177-202.
    • Handle: RePEc:emx:esteco:v:21:y:2006:i:2:p:177-202
    as

    Download full text from publisher

    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/154/156
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-976, July.
    4. 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.
    5. 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, Western Economic Association International, vol. 34(1), pages 43-56, January.
    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 271-286, August.
    7. Alexis Jacquemin, 1982. "Imperfect Market Structure And International Trade ‐ Some Recent Research," Kyklos, Wiley Blackwell, vol. 35(1), pages 75-93, February.
    8. 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 921-947, October.
    9. 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.
    10. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
    11. 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.
    12. Paul A. GEROSKI & Alexis Jacquemin, 1981. "Imports as a Competitive Discipline," Discussion Papers (REL - Recherches Economiques de Louvain) 1981031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    13. Pugel, Thomas A, 1980. "Foreign Trade and US Market Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 29(2), pages 119-129, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Akbar Ullah & Ejaz Ghani & Attiya Y. Javed, 2013. "Market Power and Industrial Performance in Pakistan," PIDE-Working Papers 2013:88, Pakistan Institute of Development Economics.
    2. Robert A. Blecker, 2009. "Comercio, Empleo y Distribución: Efectos de la Integración Regional y Global," Working Papers 2009-21, American University, Department of Economics.
    3. López Noria Gabriela, 2013. "The Effect of Trade Liberalization on Manufacturing Price Cost Margins: The Case of Mexico, 1994-2003," Working Papers 2013-10, Banco de México.
    4. Robert A. Blecker, 2012. "Stolper–Samuelson Revisited: Trade And Distribution With Oligopolistic Profits," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 569-598, July.
    5. Kochen Federico, 2016. "Price-Setting in Mexico and the Real Effects of Monetary Shocks," Working Papers 2016-21, Banco de México.
    6. James W. Bono & David H. Wolpert, 2009. "Statistical prediction of the outcome of a noncooperative game," Working Papers 2009-20, American University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ghosal, Vivek, 2000. "Product market competition and the industry price-cost markup fluctuations:: role of energy price and monetary changes," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 415-444, April.
    2. Andrea Vaona, 2016. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins in the fourth Kondratieff wave," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 155-170, August.
    3. Korner, Julia & Weiss, Christoph R., 2001. "Die Zyklik der Profite in der Ernährungswirtschaft: Ein internationaler Vergleich," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 50(03), pages 1-5.
    4. Thompson, Aileen, 2000. "Import Competition and Market Power: Canadian Evidence," Analytical Studies Branch Research Paper Series 2000139e, Statistics Canada, Analytical Studies Branch.
    5. Pedro Dal Bó, 2007. "Tacit collusion under interest rate fluctuations," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 533-540, June.
    6. Carmen García & Joan Ramon Borrell & José Manuel Ordóñez-de-Haro & Juan Luis Jiménez, 2022. "Managers’ expectations, business cycles and cartels’ life cycle," European Journal of Law and Economics, Springer, vol. 53(3), pages 451-484, June.
    7. Domenico Marchetti, 2002. "Markups and the Business Cycle: Evidence from Italian Manufacturing Branches," Open Economies Review, Springer, vol. 13(1), pages 87-103, January.
    8. Akbar Ullah & Ejaz Ghani & Attiya Javed, 2013. "Market Power and Industrial Performance in Pakistan," Working Papers id:5334, eSocialSciences.
    9. Aileen J. Thompson, 1999. "Import Competition and Market Power: Canadian Evidence," Carleton Economic Papers 99-14, Carleton University, Department of Economics, revised Mar 2000.
    10. Okada, Yosuke, 2005. "Competition and productivity in Japanese manufacturing industries," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 586-616, December.
    11. Ian Small, 1997. "The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services," Bank of England working papers 72, Bank of England.
    12. Vaona, Andrea, 2010. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins," Kiel Working Papers 1580, Kiel Institute for the World Economy (IfW Kiel).
    13. Pedro Dal Bo, 2002. "Three Essays on Repeated Games," Levine's Working Paper Archive 618897000000000038, David K. Levine.
    14. Alejandro Castañeda Sabido, 2006. "Lerner Index. Estimation and the Impact of its Market Structure Determinants," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 165-197, July-Dece.
    15. Jozef Konings & Patrick Van Cayseele & Frédéric Warzynski, 2010. "The Implementation of National Competition Policy Law and the Dynamics of Price–Cost Margins: Evidence from Belgium and the Netherlands 1993–1999," Chapters, in: Jean-Luc Gaffard & Evens Salies (ed.), Innovation, Economic Growth and the Firm, chapter 9, Edward Elgar Publishing.
    16. Harry Bloch & Michael Olive, 1999. "Cyclical and Competitive Influences on Pricing in Australian Manufacturing," The Economic Record, The Economic Society of Australia, vol. 75(3), pages 268-279, September.
    17. Siotis, Georges, 2003. "Competitive pressure and economic integration: an illustration for Spain, 1983-1996," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1435-1459, December.
    18. Beccarello, Massimo, 1997. "Time series analysis of market power: Evidence from G-7 manufacturing," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 123-136, February.
    19. Johri, Alok, 2001. "Markups and the Seasonal Cycle," Journal of Macroeconomics, Elsevier, vol. 23(3), pages 367-395, July.
    20. Kyle Bagwell & Robert Staiger, 1997. "Collusion Over the Business Cycle," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 82-106, Spring.

    More about this item

    Keywords

    price-cost margins; import penetration; concentration; cyclical effects;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:emx:esteco:v:21:y:2006:i:2:p:177-202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ximena Varela (email available below). General contact details of provider: https://edirc.repec.org/data/cecolmx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.