The Effects of Local Market Concentration and International Competition on Firm Productivity : Evidence from Mexico
Although market concentration is one of the main impediments to productivity growth globally, data constraints have limited its analysis to developed countries or cross-country studies based on definitions of market concentration across nations and industries. This paper takes advantage of a da...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/792001586453892128/The-Effects-of-Local-Market-Concentration-and-International-Competition-on-Firm-Productivity-Evidence-from-Mexico http://hdl.handle.net/10986/33604 |
| Summary: | Although market concentration is one of the main impediments
to productivity growth globally, data constraints have
limited its analysis to developed countries or cross-country
studies based on definitions of market concentration
across nations and industries. This paper takes advantage
of a database that is unusual by developing-country standards
by means of leveraging the richness of five rounds
of the Mexican Manufacturing Census between 1994 and
2014. The data allow estimation of the effects of local industry
concentration on productivity. The main results show
that a decline by 10 points in the Herfindahl-Hirschman
index (on a 0-100 scale), a measure of market concentration,
explains an increase by 1 percent in the total factor
productivity of revenue. Local industry concentration also
has heterogeneous effects on productivity across industries,
while its impact on productivity varies by level of exposure
to international markets. The results here show that
the effect of greater exposure to trade offsets and, in most
cases, reverses the negative effects of local concentration on
productivity. These results are robust to specifications based
on the estimation of firm productivity using the panels
of establishment data from the 2009 and 2014 rounds of
the economic census, to controlling for a proxy of markups,
and to the use of alternate indicators of local industry
concentration. |
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