Market power in the Mexican manufacturing sector. Estimation with instrumental variables

  • Alejandro Castañeda Sabido El Colegio de México
Keywords: manufacturing sector, productivity, returns, Mexico

Abstract

This paper uses instrumental variables to estimate market power in the manufacturing sector at the two digit level for the 1970-1990 period. Similarly to Hall (1988), the identification assumption states that the rate of growth of total factor productivity is not intrinsically procyclical. The fact that observed productivity is procyclical is due to the presence of market power. The assumptions of optimization and constant returns to scale are maintained in order to be able to estimate the degree of market power. The results show ample evidence of market power in the Mexican manufacturing sector.

References

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Bresnahan, T. (1989). "Empirical Studies of Industries with Market Power", en R. Schmalensee y R.D. Willig (eds.), Handbook of Industrial Organization. vol II., North-Holland, Amsterdam.

Domowitz, I., R. G. Hubbard, y B. Petersen (1988). "Market Structure and Cyclical Fluctuations in U.S. Manufacturing", Review of Economics and Statistics, vol. 70, pp. 55-66.

Fay, J. y J. Medoff (1985). "Labor and Output over the Business Cycle", American Economic Review, vol. 75, pp. 638-655.

Hall, R. (1986a). "The Relation Between Price and Marginal Cost in the U.S. Industry", Working Paper Series, núm. 1785, NBER, Cambridge.

Hall, R. (1986b). "Market Structure and Macro Fluctutations", Brookings Papers on Economic Activity, pp. 285-322.

Hall, R. (1988). "The Relation between Price and Marginal Cost in U.S. Industry", Journal of Political Economy, vol. 96, pp. 921-947.

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Solow, R. (1957). "Technical Change and the Aggregate Production Function", Review of Economics and Statistics, vol. 39, pp. 312-320.

Published
01-07-1996
How to Cite
Castañeda SabidoA. (1996). Market power in the Mexican manufacturing sector. Estimation with instrumental variables. Estudios Económicos, 11(2), 211-236. https://doi.org/10.24201/ee.v11i2.255
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