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On the examination of non-linear relationship between market structure and performance in the US manufacturing industry

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  • Chen, Chaoyi
  • Polemis, Michael
  • Stengos, Thanasis

Abstract

This paper attempts to investigate the causal link between market structure and industry performance using a micro panel data set of USA manufacturing industries over the period 1958–2007. We employ a novel panel GMM model strongly accounting for endogenous regressors and threshold variable. The empirical findings denote the existence of a non-monotonic relationship between market structure and total-factor productivity (TFP). Our findings call for future research on the impact of market structure on consumer welfare.

Suggested Citation

  • Chen, Chaoyi & Polemis, Michael & Stengos, Thanasis, 2018. "On the examination of non-linear relationship between market structure and performance in the US manufacturing industry," Economics Letters, Elsevier, vol. 164(C), pages 1-4.
    • Handle: RePEc:eee:ecolet:v:164:y:2018:i:c:p:1-4
    DOI: 10.1016/j.econlet.2017.12.030
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    References listed on IDEAS

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    1. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    2. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    3. Michael L. Polemis & Thanasis Stengos, 2019. "Does competition prevent industrial pollution? Evidence from a panel threshold model," Business Strategy and the Environment, Wiley Blackwell, vol. 28(1), pages 98-110, January.
    4. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    5. Chang-Tai Hsieh, 1999. "Productivity Growth and Factor Prices in East Asia," American Economic Review, American Economic Association, vol. 89(2), pages 133-138, May.
    6. Seo, Myung Hwan & Shin, Yongcheol, 2016. "Dynamic panels with threshold effect and endogeneity," Journal of Econometrics, Elsevier, vol. 195(2), pages 169-186.
    7. Asimakopoulos, Stylianos & Karavias, Yiannis, 2016. "The impact of government size on economic growth: A threshold analysis," Economics Letters, Elsevier, vol. 139(C), pages 65-68.
    8. Polemis, Michael L. & Stengos, Thanasis, 2015. "Does market structure affect labour productivity and wages? Evidence from a smooth coefficient semiparametric panel model," Economics Letters, Elsevier, vol. 137(C), pages 182-186.
    9. Mian Dai & Qihong Liu & Konstantinos Serfes, 2014. "Is the Effect of Competition on Price Dispersion Nonmonotonic? Evidence from the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 161-170, March.
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    Citations

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    Cited by:

    1. Rangan Gupta & Patrick Kanda & Mark E. Wohar, 2021. "Predicting Stock Market Movements in the United States: The Role of Presidential Approval Ratings," International Review of Finance, International Review of Finance Ltd., vol. 21(1), pages 324-335, March.
    2. Michael L. Polemis, 2020. "A note on the estimation of competition-productivity nexus: a panel quantile approach," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(4), pages 663-676, December.
    3. Baah Aye Kusi & Lydia Adzobu & Alex Kwame Abasi & Kwadjo Ansah-Adu, 2020. "Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(1), pages 66-99, April.
    4. Halkos, George & Polemis, Michael, 2018. "Does market structure trigger efficiency? Evidence for the USA before and after the financial crisis," MPRA Paper 84511, University Library of Munich, Germany.
    5. Dagoumas, Athanasios S. & Polemis, Michael L., 2020. "Carbon pass-through in the electricity sector: An econometric analysis," Energy Economics, Elsevier, vol. 86(C).
    6. Dagoumas, Athanasios & Polemis, Michael, 2018. "Analysing Carbon Pass-Through Rate Mechanism in the Electricity Sector: Evidence from Greece," MPRA Paper 91067, University Library of Munich, Germany.
    7. Polemis, Michael L. & Stengos, Thanasis & Tzeremes, Nickolaos G., 2020. "Revisiting the impact of financial depth on growth: A semi-parametric approach," Finance Research Letters, Elsevier, vol. 36(C).
    8. Michael L. Polemis & Mike G. Tsionas, 2022. "Endogenous productivity: a new Bayesian perspective," Annals of Operations Research, Springer, vol. 318(1), pages 425-451, November.
    9. Tsionas, Mike G. & Polemis, Michael L., 2019. "On the estimation of total factor productivity: A novel Bayesian non-parametric approach," European Journal of Operational Research, Elsevier, vol. 277(3), pages 886-902.
    10. George E. Halkos & Michael L. Polemis, 2019. "The impact of market structure on environmental efficiency in the United States: A quantile approach," Business Strategy and the Environment, Wiley Blackwell, vol. 28(1), pages 127-142, January.
    11. Polemis, Michael L. & Tzeremes, Nickolaos G., 2019. "Competitive conditions and sectors’ productive efficiency: A conditional non-parametric frontier analysis," European Journal of Operational Research, Elsevier, vol. 276(3), pages 1104-1118.

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    More about this item

    Keywords

    Market structure; TFP; Threshold; Competition; Non-linear effects;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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