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Persistence of Profitability and the Dynamics of Competition in Turkey, 1985-2004

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  • Kaplan, Muhittin
  • Aslan, Alper

Abstract

The existing empirical literature on the intensity of competition in developing countries shows that the persistence of profitability is smaller in developing than in advanced economies. To solve this controversy, Glen, Lee and Singh (2003) propose to look into the underlying sources of the persistency, namely persistency of monopoly power and of economic efficiency. This paper reports on time series analysis of the persistence of corporate profitability and its constituent parts for the largest 114 manufacturing firms in Turkey. Its central result is that the observed persistency of profits in the markets is due to persistency of productivity rather than the persistency of profit margins suggesting that pro-competitive characteristics of markets overweigh the inimical competition characteristics in Turkey.

Suggested Citation

  • Kaplan, Muhittin & Aslan, Alper, 2006. "Persistence of Profitability and the Dynamics of Competition in Turkey, 1985-2004," MPRA Paper 10602, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10602
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    References listed on IDEAS

    as
    1. Foroutan, Faezeh, 1991. "Foreign trade and its relation to competition and productivity in Turkish industry," Policy Research Working Paper Series 604, The World Bank.
    2. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
    3. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Jack Glen & Kevin Lee & Ajit Singh, 2003. "Corporate profitability and the dynamics of competition in emerging markets: a time series analysis," Economic Journal, Royal Economic Society, vol. 113(491), pages 465-484, November.
    6. Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, vol. 72(2), pages 247-253, August.
    7. Dani Rodrik, 1988. "Imperfect Competition, Scale Economies, and Trade Policy in Developing Countries," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 109-144, National Bureau of Economic Research, Inc.
    8. Robert E. Baldwin, 1988. "Trade Policy Issues and Empirical Analysis," NBER Books, National Bureau of Economic Research, Inc, number bald88-2.
    9. Ajit Singh, 2003. "Competition, corporate governance and selection in emerging markets," Economic Journal, Royal Economic Society, vol. 113(491), pages 443-464, November.
    10. Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 663-687, July.
    11. Tybout, James R, 1992. "Linking Trade and Productivity: New Research Directions," The World Bank Economic Review, World Bank, vol. 6(2), pages 189-211, May.
    12. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 615-625.
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    More about this item

    Keywords

    Persistence of profitability; Economic efficiency;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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