Is there a causal effect of concentration on persistent profitability differentials?

Jan Keil

Industrial and Corporate Change, 2019, vol. 28, issue 2, 241-257

Abstract: This article searches for a causal effect of industry concentration on estimates of persistent profitability differentials. I offer solutions to identification problems that plague related analyses by applying an IV and a natural experiment. This is the first study that explains estimates of persistent profit differentials using business segments data, allowing to match micro- and industry-level data more consistently. Testing linear relations, critical concentration levels, and interactions with mobility barriers, I find no evidence that concentration has any positive effect on long-run profitability differences. Results rather tend to point to a statistically and economically significant negative causal effect.

JEL-codes: D40 L10 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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