Reductions in Real versus Tariff Barriers: The Impact on Industry Concentration
Economic integration has had ambiguous effects on industry concentration. The literature on the topic proposes various explanations for these empirical findings. This paper provides an additional theoretical argument. It shows that in a world of monopolistic competition, integration alone (modeled as a reduction of trade barriers) may exert opposing forces on industry concentration, depending on whether the barrier consists of real (frictional) or tariff costs. In particular, the Herfindahl index of industry concentration falls for a reduction in real costs, but rises for a reduction in tariff costs. The reason is that real barriers burn up resources, such that industry profitability is reduced, reducing entry, and resulting in fewer firms and a correspondingly higher concentration. Under a tariff barrier, the redistributed tariff revenue stabilizes industry profitability, resulting in more firms and a lower concentration.
Volume (Year): 3 (2003)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://springerlink.metapress.com/link.asp?id=105724|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lyons, Bruce & Matraves, Catherine & Moffatt, Peter, 2001. "Industrial Concentration and Market Integration in the European Union," Economica, London School of Economics and Political Science, vol. 68(269), pages 1-26, February.
- Venables, Anthony J., 1996. "Trade policy, cumulative causation, and industrial development," Journal of Development Economics, Elsevier, vol. 49(1), pages 179-197, April.
- Catherine Matraves, 1998.
"Market Structure, R&D and Advertising in the Pharmaceutical Industry,"
CIG Working Papers
FS IV 98-17, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-94, June.
- Davies, Stephen & Lyons, Bruce, 1996. "Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism," OUP Catalogue, Oxford University Press, number 9780198289739, June.
- Hamilton, Stephen F., 1999. "Demand shifts and market structure in free-entry oligopoly equilibria," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 259-275, February.
- Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
- Van Long, N. & Soubeyran, A., 1996.
"Cost Heterogeneity, Industry Concentration and Startegic Trade Policies,"
96a39, Universite Aix-Marseille III.
- Ngo, Van Long & Soubeyran, Antoine, 1997. "Cost heterogeneity, industry concentration and strategic trade policies," Journal of International Economics, Elsevier, vol. 43(1-2), pages 207-220, August.
- Symeonidis, George, 1999.
"Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK,"
CEPR Discussion Papers
2308, C.E.P.R. Discussion Papers.
- Symeonidis, George, 2000. "Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 1-26, March.
- Marín Uribe, Pedro Luis & Siotis, Georges, 2002. "Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry," CEPR Discussion Papers 3162, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:kap:jincot:v:3:y:2003:i:4:p:251-268. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.