Market structure: Concentration and imports as determinants of industry margins
DOI:
https://doi.org/10.24201/ee.v21i2.154Keywords:
price-cost margins, import penetration, concentration, cyclical effectsAbstract
The paper analyzes the determinants of price-cost margins following traditional industrial organization approaches. The price-cost margins are made function of the concentration index and the degree of import penetration. We find that imports act as a market disciplining device that reduces the price-cost margins of the domestic industry. After trade liberalization, the impact of concentration diminishes. Controlling for cyclical behavior of the price-cost margins the paper shows that cross-section studies tend to bias the estimates. A distinction between durables and non-durables is made, finding strong evidence for concentration to affect the price-cost margins of durables.
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