Lower bounds of concentration in a small open economy

Pekka Ilmakunnas

MPRA Paper from University Library of Munich, Germany

Abstract: We examine how Sutton’s “bounds” approach works in a small country where industries have relatively high export and import intensities. Import competition is used as an indicator for the degree of competition in the low sunk cost industries. The bounds are estimated as stochastic frontiers, where observable industry characteristics, export intensity and entry barriers, are allowed to affect the mean and variance of the deviations from the frontier. In accordance with the theory, high R&D intensity industries have a lower bound for concentration, which is higher than that for low sunk cost intensity industries. For high advertising industries the theory does not hold as well. High import competition leads to a higher bound in the low sunk cost industries.

Keywords: concentration; sunk costs; R&D; stochastic frontiers (search for similar items in EconPapers)
JEL-codes: L11 L13 L60 (search for similar items in EconPapers)
Date: 2006-09
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Related works:
Journal Article: Lower Bounds of Concentration in a Small Open Economy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1859

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