Reductions in Real versus Tariff Barriers: The Impact on Industry Concentration

Jan Jørgensen and Philipp J.H. Schr– der ()
Authors registered in the RePEc Author Service: Philipp J.H. Schröder

Journal of Industry, Competition and Trade, 2003, vol. 3, issue 4, 268 pages

Abstract: Economic integration has had ambiguous effects on industry concentration. The literature on the topic proposes various explanations for these empirical findings. This paper provides an additional theoretical argument. It shows that in a world of monopolistic competition, integration alone (modeled as a reduction of trade barriers) may exert opposing forces on industry concentration, depending on whether the barrier consists of real (frictional) or tariff costs. In particular, the Herfindahl index of industry concentration falls for a reduction in real costs, but rises for a reduction in tariff costs. The reason is that real barriers burn up resources, such that industry profitability is reduced, reducing entry, and resulting in fewer firms and a correspondingly higher concentration. Under a tariff barrier, the redistributed tariff revenue stabilizes industry profitability, resulting in more firms and a lower concentration.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://journals.kluweronline.com/issn/1566-1679/contents (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:3:y:2003:i:4:p:251-268

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2

Access Statistics for this article

Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder

More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().