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Competition and Productivity Growth in South Africa

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  • Aghion, Philippe
  • Braun, Matias
  • Fedderke, Johannes

Abstract

This article shows that mark-ups are significantly higher in South African manufacturing industries than they are in corresponding industries worldwide. We test for the consequences of this low-level of product market competition on productivity growth. The results of the paper are that high mark-ups have a large negative impact on productivity growth in South African manufacturing industry. Our results are robust to three different data sources, two alternative measures of productivity growth, and three distinct measures of the mark-up. Controlling for potential endogeneity of regressors does not eliminate the findings. The definitive version is available at www3.interscience.wiley.com.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3350068/aghion_southafrica.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3350068.

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Date of creation: 2008
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Publication status: Published in Economics of Transition
Handle: RePEc:hrv:faseco:3350068

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  1. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9215, Faculty of Economics, University of Cambridge.
  2. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(429), pages 333-44, March.
  3. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 42(6), pages 1037-1052.
  4. Johannes Fedderke & Chandana Kularatne & Martine Mariotti, 2007. "Mark-up Pricing in South African Industry," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 16(1), pages 28-69, January.
  5. Dalia Hakura, 1998. "The Effects of European Economic Integrationon the Profitability of Industries," IMF Working Papers 98/85, International Monetary Fund.
  6. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  7. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, Elsevier, vol. 41(3-5), pages 771-782, April.
  8. Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
  9. Pesaran, M Hashem, 1997. "The Role of Economic Theory in Modelling the Long Run," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(440), pages 178-91, January.
  10. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
  11. Lawrence Edwards, 2005. "Has South Africa Liberalised Its Trade?," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 73(4), pages 754-775, December.
  12. Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(3), pages 467-92, July.
  13. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9622, Faculty of Economics, University of Cambridge.
  14. Johannes Fedderke, 2004. "Investment in Fixed Capital Stock: Testing for the Impact of Sectoral and Systemic Uncertainty," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(2), pages 165-187, 05.
  15. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(3), pages 529-54, July.
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Citations

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Cited by:
  1. Philippe Aghion & Johannes Fedderke & Peter Howitt & Chandana Kularatne & Nicola Viegi, 2008. "Testing Creative Destruction in an Opening Economy : the Case of the South African Manufacturing Inudstries," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2008-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Kumar, Saten & Pacheco, Gail & Rossouw, Stephanie, 2010. "How to Increase the Growth Rate in South Africa?," MPRA Paper 26105, University Library of Munich, Germany.
  3. Fosu, Samuel, 2013. "Capital structure, product market competition and firm performance: Evidence from South Africa," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 53(2), pages 140-151.
  4. Sánchez-Valadez, Manuel, 2012. "Decisiones financieras, competencia en el mercado y desempeño de las empresas: Evidencia empírica para Iberoamérica/Financial Decisions, Market Competition and Firm Performance: Empirical Evidence ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 359 (36 pag, Abril.
  5. World Bank, 2014. "South Africa Economic Update : Focus on Export Competitiveness," World Bank Other Operational Studies 17578, The World Bank.
  6. Sara Amoroso & Peter M. Kort & Bertrand Melenberg & Joseph Plasmans & Mark Vancauteren, 2010. "Firm Level Productivity under Imperfect Competition in Output and Labor Markets," CESifo Working Paper Series 3082, CESifo Group Munich.
  7. Siba, Eyerusalem & Soderbom, Mans & Bigsten, Arne & Gebreeyesus, Mulu, 2012. "Enterprise Agglomeration, Output Prices, and Physical Productivity: Firm-Level Evidence from Ethiopia," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Rattsø, Jørn & Stokke, Hildegunn E., 2012. "Trade policy in a growth model with technology gap dynamics and simulations for South Africa," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(7), pages 1042-1056.
  9. Fedderke, Johannes W. & Hill, Andrew J., 2011. "Industry structure and labor market flexibility in the South African manufacturing sector: A time series and panel data approach," Economic Modelling, Elsevier, Elsevier, vol. 28(3), pages 1291-1302, May.
  10. Johannes Fedderke, 2012. "The Cost of Rigidity: The Case of the South African Labor Market," Working Papers 290, Economic Research Southern Africa.
  11. Delfin Go & Marna Kearney & Vijdan Korman & Sherman Robinson & Karen Thierfelder, 2010. "Wage Subsidy and Labour Market Flexibility in South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(9), pages 1481-1502.
  12. Jørn Rattsø & Torfinn Harding, 2009. "Industrial labor productivities and tariffs in South Africa: Identification based on multilateral liberalization reform," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 10309, Department of Economics, Norwegian University of Science and Technology.
  13. Philippe Aghion & Heike Harmgart & Natalia Weisshaar, 2010. "Fostering growth in CEE countries: a country-tailored approach to growth policy," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 118, European Bank for Reconstruction and Development, Office of the Chief Economist.
  14. Jørn Rattsø & Hildegunn E. Stokke, 2009. "Trade barriers to growth in South Africa: Endogenous investment-productivity-trade interaction," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c014_010, DEGIT, Dynamics, Economic Growth, and International Trade.
  15. Fethi AMRI & Rim MOUELHI, 2013. "Productivity Growth And Competition In Tunisian Manufacturing Firms," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 37, pages 37-64.
  16. Jørn Rattsø & Torfinn Harding, 2009. "Looking Abroad, but Lagging Behind: How the World Technology Frontier Affects South Africa," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 10209, Department of Economics, Norwegian University of Science and Technology.
  17. Samuel Fosu, 2013. "Capital Structure, Product Market Competition and Firm Performance: Evidence from South Africa," Discussion Papers in Economics 13/11, Department of Economics, University of Leicester.
  18. Nir Klein, 2011. "South Africa," IMF Working Papers 11/204, International Monetary Fund.

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