Lower bounds of concentration in Taiwan's manufacturing industries: do exports matter?

Chih-Hai Yang and Chun-Chien Kuo

Applied Economics, 2007, vol. 39, issue 18, 2389-2401

Abstract: This article aims to test Sutton's 'lower bounds' approach on the analysis of market concentration in a small open economy like Taiwan. Exporting, which is important to a small open economy, is also considered in order to investigate the role of foreign competition on the market structure. Using a stochastic frontier approach, the estimate findings are in accordance with Sutton's predictions, whereby the lower bounds for high advertising and/or R&D-intensive industries are higher than those for low advertising and/or R&D-intensive industries in Taiwan. At the same time, the lower bounds of concentrations for export-intensive industries do not differ significantly from that of nonexport-intensive industries. The deviations from the lower bound are explained by industry characteristics such as the cost disadvantage ratio, the share of small and median-size enterprises, turnover rate and growth rate.

Date: 2007
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DOI: 10.1080/00036840600606237

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