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Profitability, concentration, imports and exports: the case of Taiwan's midstream petrochemical industries

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  • Kuo-Liang Wang
  • Shu-Ching Wang

Abstract

Based on an open-economy oligopoly model, causalities among domestic firms' price-cost margin (PCM), domestic concentration, import and export shares are derived and a simultaneous-equation system is established. By utilizing the 1989-1997 data of Taiwan's midstream petrochemical industries, three-stage least squares is used to estimate the system. The empirical results confirm the derived results, and demonstrate: (1) there exist simultaneous relationships among domestic PCM, domestic concentration, import and export shares; (2) import concentration affects domestic concentration positively, but affects domestic PCM, import and export shares negatively; (3) diversifying international markets improves domestic firms' PCM; (4) domestic firms seem to be in a situation of collusion.

Suggested Citation

  • Kuo-Liang Wang & Shu-Ching Wang, 2008. "Profitability, concentration, imports and exports: the case of Taiwan's midstream petrochemical industries," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1457-1473.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:11:p:1457-1473
    DOI: 10.1080/00036840600820697
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    References listed on IDEAS

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    1. Cihan Yalcin, 2000. "Price-Cost Margins and Trade Liberalization in Turkish Manufacturing Industry : A Panel Data Analysis," Discussion Papers 0001, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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    1. Ali Culha & Cihan Yalcin, 2005. "The Determinants of the Price-Cost Margins of the Manufacturing Firms in Turkey," Working Papers 0515, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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