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Lower bounds of concentration in Taiwan's manufacturing industries: do exports matter?

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  • Chih-Hai Yang
  • Chun-Chien Kuo

Abstract

This article aims to test Sutton's 'lower bounds' approach on the analysis of market concentration in a small open economy like Taiwan. Exporting, which is important to a small open economy, is also considered in order to investigate the role of foreign competition on the market structure. Using a stochastic frontier approach, the estimate findings are in accordance with Sutton's predictions, whereby the lower bounds for high advertising and/or R&D-intensive industries are higher than those for low advertising and/or R&D-intensive industries in Taiwan. At the same time, the lower bounds of concentrations for export-intensive industries do not differ significantly from that of nonexport-intensive industries. The deviations from the lower bound are explained by industry characteristics such as the cost disadvantage ratio, the share of small and median-size enterprises, turnover rate and growth rate.

Suggested Citation

  • Chih-Hai Yang & Chun-Chien Kuo, 2007. "Lower bounds of concentration in Taiwan's manufacturing industries: do exports matter?," Applied Economics, Taylor & Francis Journals, vol. 39(18), pages 2389-2401.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:18:p:2389-2401
    DOI: 10.1080/00036840600606237
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    2. Davies, Stephen & Lyons, Bruce, 1996. "Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism," OUP Catalogue, Oxford University Press, number 9780198289739.
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