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http://ssrn.com/abstract=1021813
 
 

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The Dynamics of Market Structure and Market Size in Two Health Services Industries


Timothy Dunne


Federal Reserve Bank of Cleveland

Shawn D. Klimek


U.S. Census Bureau - Center for Economic Studies

Mark J. Roberts


Pennsylvania State University - College of the Liberal Arts - Department of Economics; National Bureau of Economic Research (NBER)

Yi Xu


NYU - Department of Economics

October 2007

Federal Reserve Bank of Cleveland Working Paper No. 07-12
US Census Bureau Center for Economic Studies Paper No. CES-WP-07-26

Abstract:     
The relationship between the size of a market and the competitiveness of the market has been of long-standing interest to IO economists. Empirical studies have used the relationship between the size of the geographic market and both the number of firms in the market and the average sales of the firms to draw inferences about the degree of competition in the market. This paper extends this framework to incorporate the analysis of entry and exit flows. A key implication of recent entry and exit models is that current market structure will likely depend upon the history of past participation. The paper explores these issues empirically by examining producer dynamics for two health service industries, dentistry and chiropractic services. We find that the number of potential entrants and past number of incumbent firms are correlated with current market structure. The empirical results also show that as market size increases the number of firms rises less than proportionately, firm size increases, and average productivity increases. However, the magnitude of the correlations are sensitive to the inclusion of the market history variables.

Number of Pages in PDF File: 35

Keywords: producer dynamics, entry and exit, market size

JEL Classification: LO, L1, L8

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Date posted: October 18, 2007  

Suggested Citation

Dunne, Timothy and Klimek, Shawn D. and Roberts, Mark J. and Xu, Yi, The Dynamics of Market Structure and Market Size in Two Health Services Industries (October 2007). Federal Reserve Bank of Cleveland Working Paper No. 07-12; US Census Bureau Center for Economic Studies Paper No. CES-WP-07-26. Available at SSRN: http://ssrn.com/abstract=1021813 or http://dx.doi.org/10.2139/ssrn.1021813

Contact Information

Timothy Dunne (Contact Author)
Federal Reserve Bank of Cleveland ( email )
PO Box 6387
Cleveland, OH 44101-1387
United States
Shawn D. Klimek
U.S. Census Bureau - Center for Economic Studies ( email )
4600 Silver Hill Road
Washington, DC 20233
United States
(301) 763-2861 (Phone)
(301 763-5935 (Fax)
HOME PAGE: http://www.ces.census.gov
Mark J. Roberts
Pennsylvania State University - College of the Liberal Arts - Department of Economics ( email )
513 Kern Graduate Building
University Park, PA 16802-3306
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Yi Xu
NYU - Department of Economics ( email )
New York, NY 10012
United States
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