Economics at your fingertips  

Reductions in Real versus Tariff Barriers: The Effects on Industry Concentration

Philipp Schröder and Jan Jørgensen

MPRA Paper from University Library of Munich, Germany

Abstract: Economic integration in Europe has had ambiguous effects on industry concentration. The literature has proposed various explanations of the empirical findings. The present paper provides an additional theoretical argument. We show that in a world of monopolistic competition, integration in it self (modelled as a reduction of trade barriers) generates opposing effects on industry concentration, depending on wether the barrier is a real (frictional) or a tariff cost. In particular, the Herfindahl index of industry concentration falls for a reduction in real costs, but rises for a reduction in tariff costs. The reason is that real barriers burn up resources, such that industry profitability is reduced, reducing entry, and resulting in fewer firms and higher concentration. Under a tariff barrier, the redistributed tariff revenue stabilises industry profitability, resulting in more firms and lower concentration.

Keywords: real costs; tariff costs; industry concentration; market structure; integration (search for similar items in EconPapers)
JEL-codes: L11 F15 F12 (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Published in Journal of Industry Competition and Trade 4.3(2003): pp. 251-268

Downloads: (external link) original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

Page updated 2019-05-26
Handle: RePEc:pra:mprapa:124