The Influence of Increased Foreign Competition on Industrial Concentration and Profitability

Jaime de Melo and Shujiro Urata

Chapter 9 in Developing Countries in the World Economy, 2015, pp 219-236 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper uses the Chilean manufacturing censuses of 1967 and 1979 to examine the effects of the Chilean reforms in the mid~1970s on market structure and performance. The reforms substantially increased the concentration in industry and substantially reduced profitability. These outcomes are interpreted in the light of hypotheses about the effect of potential entrants on market structure and on the pricing behavior of incumbents. Next, a cross-sectoral simultaneous equations model of structure and performance is estimated to isolate the contribution of import and export shares to cross-sectoral variations in concentration and profitability and to test for structural change between the two censuses. The analysis confirms that the liberalization of trade changed the way import and export shares determined profitability and supports the import discipline hypothesis.

Keywords: Trade Barriers and Market Structure; Quantitative Restrictions; Political Economy and Migration; Trade and the Environment (search for similar items in EconPapers)
Date: 2015
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Journal Article: The influence of increased foreign competition on industrial concentration and profitability (1986)
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