Profitability, concentration, imports and exports: the case of Taiwan's midstream petrochemical industries

Kuo-Liang Wang and Shu-Ching Wang

Applied Economics, 2008, vol. 40, issue 11, 1457-1473

Abstract: Based on an open-economy oligopoly model, causalities among domestic firms' price-cost margin (PCM), domestic concentration, import and export shares are derived and a simultaneous-equation system is established. By utilizing the 1989-1997 data of Taiwan's midstream petrochemical industries, three-stage least squares is used to estimate the system. The empirical results confirm the derived results, and demonstrate: (1) there exist simultaneous relationships among domestic PCM, domestic concentration, import and export shares; (2) import concentration affects domestic concentration positively, but affects domestic PCM, import and export shares negatively; (3) diversifying international markets improves domestic firms' PCM; (4) domestic firms seem to be in a situation of collusion.

Date: 2008
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DOI: 10.1080/00036840600820697

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