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Market Structure: Concentration and Imports as Determinants of Industry Margins

Author

Listed:
  • Alejandro Castañeda Sabido

    (El Colegio de México)

  • David Mulato

    (Universidad Torcuato di Tella)

Abstract

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.

Suggested Citation

  • Alejandro Castañeda Sabido & David Mulato, 2006. "Market Structure: Concentration and Imports as Determinants of Industry Margins," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 177-202.
    • Handle: RePEc:emx:esteco:v:21:y:2006:i:2:p:177-202
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    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/154/156
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    References listed on IDEAS

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    5. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
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    11. Paul A. GEROSKI & Alexis Jacquemin, 1981. "Imports as a Competitive Discipline," Discussion Papers (REL - Recherches Economiques de Louvain) 1981031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    Cited by:

    1. Akbar Ullah & Ejaz Ghani & Attiya Y. Javed, 2013. "Market Power and Industrial Performance in Pakistan," PIDE-Working Papers 2013:88, Pakistan Institute of Development Economics.
    2. Robert A. Blecker, 2009. "Comercio, Empleo y Distribución: Efectos de la Integración Regional y Global," Working Papers 2009-21, American University, Department of Economics.
    3. López Noria Gabriela, 2013. "The Effect of Trade Liberalization on Manufacturing Price Cost Margins: The Case of Mexico, 1994-2003," Working Papers 2013-10, Banco de México.
    4. Kochen Federico, 2016. "Price-Setting in Mexico and the Real Effects of Monetary Shocks," Working Papers 2016-21, Banco de México.
    5. Robert A. Blecker, 2012. "Stolper–Samuelson Revisited: Trade And Distribution With Oligopolistic Profits," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 569-598, July.
    6. James W. Bono & David H. Wolpert, 2009. "Statistical prediction of the outcome of a noncooperative game," Working Papers 2009-20, American University, Department of Economics.

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    More about this item

    Keywords

    price-cost margins; import penetration; concentration; cyclical effects;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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