The Effects of Local Market Concentration and International Competition on Firm Productivity: Evidence from Mexico

Carlos Rodriguez Castelan (), Luis Lopez-Calva and Oscar Barriga Cabanillas ()
Additional contact information
Carlos Rodriguez Castelan: World Bank
Oscar Barriga Cabanillas: World Bank
Authors registered in the RePEc Author Service: Carlos Rodríguez-Castelán

No 13147, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Although market concentration is one of the main impediments to productivity growth globally, data constraints have limited its analysis to developed countries or cross-country studies based on definitions of market concentration across nations and industries. This paper takes advantage of a database that is unusual by developing-country standards by means of leveraging the richness of five rounds of the Mexican Manufacturing Census between 1994 and 2014. The data allow estimation of the effects of local industry concentration on productivity. The main results show that a decline by 10 points in the Herfindahl-Hirschman index (on a 0-100 scale), a measure of market concentration, explains an increase by 1 percent in the total factor productivity of revenue. Local industry concentration also has heterogeneous effects on productivity across industries, while its impact on productivity varies by level of exposure to international markets. Results show that the effect of greater exposure to trade offsets and, in most cases, reverses the negative effects of local concentration on productivity. These results are robust to specifications based on the estimation of firm productivity using the panels of establishment data from the 2009 and 2014 rounds of the economic census, to controlling for a proxy of markups, and to using alternative indicators of local industry concentration.

Keywords: productivity; market concentration; instrumental variables (search for similar items in EconPapers)
JEL-codes: C26 D24 D4 F12 L1 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2020-04
New Economics Papers: this item is included in nep-com, nep-eff, nep-gen, nep-int, nep-tid and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The Effects of Local Market Concentration and International Competition on Firm Productivity: Evidence from Mexico (2020)
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