The influence of increased foreign competition on industrial concentration and profitability

Jaime de Melo, Shujiro Urata

Research output: Contribution to journalArticle

21 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)287-304
Number of pages18
JournalInternational Journal of Industrial Organization
Volume4
Issue number3
DOIs
Publication statusPublished - 1986
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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