Market structure, external exposure and industry profitability: evidence from taiwan

Song-Ken Hsu, Ming-Fang Tsai () and Chih-Hai Yang

International Economic Journal, 2008, vol. 22, issue 2, 201-214

Abstract: This article aims to investigate empirically the influences of concentration, exports, and exchange rate on industry profitability in a small open economy, in Taiwan. Developing a simple theoretical framework and utilizing panel data of four-digit manufacturing industries over the period 1986-96 to test our findings indicate that concentration has a positive impact on profit margin, while the impacts of export intensity and external exposure are significantly negative. This result indicates that export-intensive industries tend to have a lower profitability in Taiwan, because export firms act as price takers in international markets. Moreover, the exchange rate is found to have a relatively strong and significant effect on industry profitability, whereby the devaluation of the New Taiwan Dollar hurts more those industries with a higher share of imported inputs during the sample period.

Keywords: concentration; export; exchange rate; industry profitability (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/10168730802079805

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