Measuring the degree of collusive conduct in the Mexican manufacturing sector

Abstract

The paper estimates the degree of collusive conduct in the mexican manufacturing industries by estimating the degree of market power of a representative firm in an industry. Similarly to Hall (1988), the identification assumption for the degree of market power is that total factor productivity growth is not procyclical. To measure the degree of collusive conduct, the paper estimates the market elasticity of demand by exploiting a covariance restriction between demand shocks and productivity shocks, Shapiro (1987). The degree of collusive conduct is obtained by calculating the ratio between the representative firms elasticity of demand and the market elasticity of demand.