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Is there a causal effect of concentration on persistent profitability differentials?

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  • Jan Keil

Abstract

This article searches for a causal effect of industry concentration on estimates of persistent profitability differentials. I offer solutions to identification problems that plague related analyses by applying an IV and a natural experiment. This is the first study that explains estimates of persistent profit differentials using business segments data, allowing to match micro- and industry-level data more consistently. Testing linear relations, critical concentration levels, and interactions with mobility barriers, I find no evidence that concentration has any positive effect on long-run profitability differences. Results rather tend to point to a statistically and economically significant negative causal effect.

Suggested Citation

  • Jan Keil, 2019. "Is there a causal effect of concentration on persistent profitability differentials?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(2), pages 241-257.
    • Handle: RePEc:oup:indcch:v:28:y:2019:i:2:p:241-257.
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    File URL: http://hdl.handle.net/10.1093/icc/dty014
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    Cited by:

    1. Evguenia Bessonova & Ksenia Gonchar, 2022. "Can the Growth of Competitive Pressure and Hardening of Budget Constraints Reduce the Efficiency Loss due to State Ownership?," Russian Journal of Money and Finance, Bank of Russia, vol. 81(3), pages 22-53, September.

    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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