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When is concentration beneficial? Evidence from U.S. manufacturing

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  • Rigoberto A. López

    ()
    (Department of Agricultural and Resource Economics, University of Conneticut.)

  • Elena López

    ()
    (Departamento de Economía , Universidad de Alcalá.)

  • Carmen Liron-Espana

    (System Planning, ISO-NE.)

Abstract

This article estimates the impact of industrial concentration on market power and cost and then links the ensuing welfare changes to market structure characteristics using a sample of 232 U.S. manufacturing industries. Empirical results indicate that further increases in concentration would enhance welfare in 70% of the industries due to widespread efficiency gains, although these would generally not be passed on to consumers. From a social standpoint, further concentration is more likely to be beneficial in industries with economies of size, high export intensity, which are engaged in consumer-oriented goods, face larger markets, and have low or moderate levels of initial concentration.

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Bibliographic Info

Paper provided by Universidad de Alcalá, Departamento de Economía. in its series Alcamentos with number 0901.

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Length: pages 22
Date of creation: 2009
Date of revision:
Handle: RePEc:alc:alcamo:0901

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Keywords: Concentration; welfare; economies of size; market power; manufacturing;

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  1. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August.
  2. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  3. Azzam, Azzeddine M, 1997. "Measuring Market Power and Cost-Efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-86, December.
  4. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  5. Lopez, Rigoberto A. & Lopez, Elena, 2001. "The Impact of Imports on Price-Cost Margins: An Empirical Illustration," Research Reports 25153, University of Connecticut, Food Marketing Policy Center.
  6. Rigoberto Lopez & Azzeddine Azzam & Carmen Lirón-España, 2002. "Market Power and/or Efficiency: A Structural Approach," Review of Industrial Organization, Springer, vol. 20(2), pages 115-126, March.
  7. Holmes, Thomas J. & Stevens, John J., 2005. "Does home market size matter for the pattern of trade?," Journal of International Economics, Elsevier, vol. 65(2), pages 489-505, March.
  8. Stalhammar, Nils-Olov, 1991. "Domestic market power and foreign trade : The case of Sweden," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 407-424, September.
  9. Allen Berger & Timothy Hannan, 1994. "The Efficiency Cost of Market Power in the Banking Industry: A Test of the 'Quiet Life' and Related Hypotheses," Center for Financial Institutions Working Papers 94-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
  10. Pugel, Thomas A, 1980. "Foreign Trade and US Market Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 29(2), pages 119-29, December.
  11. Fabio Panetta & Dario Focarelli, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Italian Market for Bank Deposits," CEIS Research Paper 10, Tor Vergata University, CEIS.
  12. Marvel, Howard P, 1980. "Foreign Trade and Domestic Competition," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 103-22, January.
  13. Dario Focarelli & Fabio Panetta, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits," American Economic Review, American Economic Association, vol. 93(4), pages 1152-1172, September.
  14. Nick Feltovich, 2001. "Mergers, welfare, and concentration: Results from a model of stackelberg-cournot oligopoly," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(4), pages 378-392, December.
  15. Lin Bian, 2000. "The efficiencies defence in merger cases: implications of alternative standards," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 297-318, May.
  16. Dickson, V. A. & Yu, Weiqiu, 1989. "Welfare losses in Canadian manufacturing under alternative oligopoly regimes," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 257-267, June.
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