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Market structure, external exposure and industry profitability: evidence from taiwan

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  • Song-Ken Hsu
  • Ming-Fang Tsai
  • Chih-Hai Yang

Abstract

This article aims to investigate empirically the influences of concentration, exports, and exchange rate on industry profitability in a small open economy, in Taiwan. Developing a simple theoretical framework and utilizing panel data of four-digit manufacturing industries over the period 1986-96 to test our findings indicate that concentration has a positive impact on profit margin, while the impacts of export intensity and external exposure are significantly negative. This result indicates that export-intensive industries tend to have a lower profitability in Taiwan, because export firms act as price takers in international markets. Moreover, the exchange rate is found to have a relatively strong and significant effect on industry profitability, whereby the devaluation of the New Taiwan Dollar hurts more those industries with a higher share of imported inputs during the sample period.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730802079805
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 22 (2008)
Issue (Month): 2 ()
Pages: 201-214

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Handle: RePEc:taf:intecj:v:22:y:2008:i:2:p:201-214

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Related research

Keywords: concentration; export; exchange rate; industry profitability;

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