IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v86y2008i2p367-394.html
   My bibliography  Save this article

Institutions and concentration

Author

Listed:
  • Mitton, Todd

Abstract

In a new dataset of 1.3 million firms from over 100 countries, I establish a number of regularities in cross-country differences in economic concentration. Concentration of sales and employment is substantially higher in smaller countries and in less-developed countries; these two factors alone explain roughly half the cross-country variation in concentration. Nevertheless, a number of institutional factors offer additional explanatory power for concentration. Concentration is higher in countries with higher entry costs for new firms, in countries with weaker antitrust policy, in countries with less financial development, in countries with weaker rule of law, and in countries with more burdensome regulation. Weak institutions are associated with higher concentration especially in industries that do not have naturally high levels of concentration. In addition, the relationships between institutions and concentration are more pronounced in nontradable and investment-intensive industries, suggesting that natural barriers to competition facilitate the monopolization of sectors especially when institutions are weak.

Suggested Citation

  • Mitton, Todd, 2008. "Institutions and concentration," Journal of Development Economics, Elsevier, vol. 86(2), pages 367-394, June.
  • Handle: RePEc:eee:deveco:v:86:y:2008:i:2:p:367-394
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-3878(07)00084-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 1-37.
    2. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    3. Lawrence J. White, 2002. "Trends in Aggregate Concentration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 137-160, Fall.
    4. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    5. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    6. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-690, September.
    7. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
    8. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 805-851.
    9. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    10. repec:adr:anecst:y:1995:i:37-38:p:10 is not listed on IDEAS
    11. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo.
    12. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
    13. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    14. Laura Alfaro & Andrew Charlton, 2006. "International Financial Integration and Entrepreneurship," CEP Discussion Papers dp0755, Centre for Economic Performance, LSE.
    15. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    16. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    17. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
    18. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    19. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    20. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
    21. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
    22. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    23. Cannon, C M, 1978. "International Trade, Concentration, and Competition in U.K. Consumer Goods Markets," Oxford Economic Papers, Oxford University Press, vol. 30(1), pages 130-137, March.
    24. Kumar, Manmohan S, 1985. "International Trade and Industrial Concentration," Oxford Economic Papers, Oxford University Press, vol. 37(1), pages 125-133, March.
    25. repec:hrv:faseco:30747190 is not listed on IDEAS
    26. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    27. Schmalensee, Richard, 1977. "Using the H-Index of Concentration with Published Data," The Review of Economics and Statistics, MIT Press, vol. 59(2), pages 186-193, May.
    28. Nugent, Jeffrey B. & Nabli, Mustapha K., 1992. "Development of financial markets and the size distribution of manufacturing establishments: International comparisons," World Development, Elsevier, vol. 20(10), pages 1489-1499, October.
    29. Dutz, Mark & Hayri, Aydin, 1999. "Does More Intense Competition Lead to Higher Growth?," CEPR Discussion Papers 2249, C.E.P.R. Discussion Papers.
    30. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
    31. Utton, M A, 1982. "Domestic Concentration and International Trade," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 479-497, November.
    32. Curry, B & George, K D, 1983. "Industrial Concentration: A Survey," Journal of Industrial Economics, Wiley Blackwell, vol. 31(3), pages 203-255, March.
    33. Raymond Fisman & Virginia Sarria Allende, 2010. "Regulation of entry and the distortion of industrial organization," Journal of Applied Economics, Universidad del CEMA, vol. 13, pages 91-111, May.
    34. Daughety, Andrew F, 1990. "Beneficial Concentration," American Economic Review, American Economic Association, vol. 80(5), pages 1231-1237, December.
    35. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    36. Davis, Steven J & Henrekson, Magnus, 1999. "Explaining National Differences in the Size and Industry Distribution of Employment," Small Business Economics, Springer, vol. 12(1), pages 59-83, February.
    37. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    38. Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 511-518.
    39. Scherer, Frederic M, 1973. "The Determinants of Industrial Plant Sizes in Six Nations," The Review of Economics and Statistics, MIT Press, vol. 55(2), pages 135-145, May.
    40. Weiss, Leonard W, 1983. "The Extent and Effects of Aggregate Concentration," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 429-455, June.
    41. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 467-492.
    42. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
    43. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    44. Pryor, Frederic L, 1972. "An International Comparison of Concentration Ratios," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 130-140, May.
    45. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
    46. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    47. Caves, Richard E., 1989. "International differences in industrial organization," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 21, pages 1225-1250, Elsevier.
    48. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    49. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    50. repec:hrv:faseco:30728045 is not listed on IDEAS
    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. Fabrizio Leone & Rocco Macchiavello & Tristan Reed, 2022. "Market size, markups and international price dispersion in the cement industry," CEP Discussion Papers dp1862, Centre for Economic Performance, LSE.
    2. Macedoni, Luca & Weinberger, Ariel, 2022. "Quality heterogeneity and misallocation: The welfare benefits of raising your standards," Journal of International Economics, Elsevier, vol. 134(C).
    3. Guo-Hua Cao & Jing Zhang, 2021. "Is a sustainable loop of economy and entrepreneurial ecosystem possible? a structural perspective," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(5), pages 7002-7040, May.
    4. Didier Brandao,Tatiana & Levine,Ross Eric & Schmukler,Sergio L., 2015. "Capital market financing, firm growth, and firm size distribution," Policy Research Working Paper Series 7353, The World Bank.
    5. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    6. Leone, Fabrizio & Macchiavello, Rocco & Reed, Tristan, 2021. "The Falling Price of Cement in Africa," CEPR Discussion Papers 16253, C.E.P.R. Discussion Papers.
    7. Esteban Ferro & Alberto Portugal-Perez & John S. Wilson, 2014. "Aid to the Services Sector: Does it Affect Manufacturing Exports?," The World Economy, Wiley Blackwell, vol. 37(4), pages 530-541, April.
    8. Tatiana Didier & Ross Levine & Sergio L. Schmukler, 2014. "Capital Market Financing, Firm Growth, Firm Size Distribution," NBER Working Papers 20336, National Bureau of Economic Research, Inc.
    9. Macchiavello, Rocco, 2010. "Vertical integration and investor protection in developing countries," Journal of Development Economics, Elsevier, vol. 93(2), pages 162-172, November.
    10. Juliane Markscheffel & Michael Plouffe, 2022. "Multilevel determinants of MNC corruption risk," Journal of International Business Policy, Palgrave Macmillan, vol. 5(4), pages 512-528, December.
    11. Golesorkhi, Sougand & Mersland, Roy & Randøy, Trond & Shenkar, Oded, 2019. "The Performance Impact of Informal and Formal Institutional Differences in Cross-Border Alliances," International Business Review, Elsevier, vol. 28(1), pages 104-118.
    12. Didier Brandao,Tatiana & Levine,Ross Eric & Schmukler,Sergio L., 2015. "Capital market financing, firm growth, and firm size distribution," Policy Research Working Paper Series 7353, The World Bank.
    13. Olivier Cadot & Ana M. Fernandes & Julien Gourdon & Aaditya Mattoo, 2011. "Where to Spend the Next Million? Applying Impact Evaluation to Trade Assistance," World Bank Publications - Books, The World Bank Group, number 16358.
    14. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.
    15. Nitin Navin & Pankaj Sinha, 2019. "Market Structure and Competition in the Indian Microfinance Sector," Vikalpa: The Journal for Decision Makers, , vol. 44(4), pages 167-181, December.
    16. Vrolijk, Kasper, 2022. "Economic effects of FDI: How important is rising market concentration?," IDOS Policy Briefs 12/2022, German Institute of Development and Sustainability (IDOS), Bonn.

    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. Russo Francesco Flaviano, 2018. "Informality: the Doorstep of the Legal System," Open Economics, De Gruyter, vol. 1(1), pages 49-70, June.
    2. Beck, T.H.L., 2010. "Legal Institutions and Economic Development," Other publications TiSEM 8aa07b48-ce55-4cf6-8754-7, Tilburg University, School of Economics and Management.
    3. Daron Acemoglu & Simon Johnson & Todd Mitton, 2005. "Determinants of Vertical Integration: Finance, Contracts, and Regulation," NBER Working Papers 11424, National Bureau of Economic Research, Inc.
    4. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
    5. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
    6. Thorsten Beck & Chen Lin & Yue Ma, 2014. "Why Do Firms Evade Taxes? The Role of Information Sharing and Financial Sector Outreach," Journal of Finance, American Finance Association, vol. 69(2), pages 763-817, April.
    7. Antonio Ciccone & Elias Papaioannou, 2008. "Entry regulation and intersectoral reallocation," Economics Working Papers 1353, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Beck, T.H.L. & Hoseini, M., 2014. "Informality and Access to Finance : Evidence from India," Other publications TiSEM 00e890f4-bd1a-46ba-9064-7, Tilburg University, School of Economics and Management.
    9. Almeida, Rita & Carneiro, Pedro, 2009. "Enforcement of labor regulation and firm size," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 28-46, March.
    10. Davis, Lewis S. & Williamson, Claudia R., 2016. "Culture and the regulation of entry," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 1055-1083.
    11. Klapper, Leora & Laeven, Luc & Rajan, Raghuram G, 2004. "Business Environment and Firm Entry: Evidence from International Data," CEPR Discussion Papers 4366, C.E.P.R. Discussion Papers.
    12. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    13. Aidt, Toke & Dutta, Jayasri & Sena, Vania, 2008. "Governance regimes, corruption and growth: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 195-220, June.
    14. Zoë Kuehn, 2014. "Tax Rates, Governance, And The Informal Economy In High-Income Countries," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 405-430, January.
    15. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
    16. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2021. "Are large firms born or made? Evidence from developing countries," Small Business Economics, Springer, vol. 57(1), pages 191-219, June.
    17. Philippe Aghion & Thibault Fally & Stefano Scarpetta, 2007. "Credit constraints as a barrier to the entry and post-entry growth of firms [‘Dualism and macroeconomic volatility’]," Economic Policy, CEPR;CES;MSH, vol. 22(52), pages 732-779.
    18. Straub, Stéphane, 2005. "Informal sector: The credit market channel," Journal of Development Economics, Elsevier, vol. 78(2), pages 299-321, December.
    19. Bernard Yeung & Randall Morck & Daniel Wolfenzon, 2004. "Corporate Governance, Economic Entrenchment and Growth," Working Papers 04-21, New York University, Leonard N. Stern School of Business, Department of Economics.
    20. Davis, Lewis S., 2010. "Institutional flexibility and economic growth," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 306-320, September.

    More about this item

    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:eee:deveco:v:86:y:2008:i:2:p:367-394. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/devec .

    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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/devec .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.