Is There a Causal Effect of Concentration on Persistent Profitability Differentials?

Industrial and Corporate Change, 2018

33 Pages Posted: 6 Dec 2016 Last revised: 24 Aug 2018

See all articles by Jan Keil

Jan Keil

Humboldt Universität zu Berlin

Date Written: January 31, 2018

Abstract

This article searches for a causal effect of industry concentration on estimates of persistent profitability differentials. I offer solutions to identification problems that plague related analyses by applying an IV and a natural experiment. This is the first study that explains estimates of persistent profit differentials using business segments data, allowing to match micro and industry level data more consistently. Testing linear relations, critical concentration levels and interactions with mobility barriers I find no evidence that concentration has any positive effect on long-run profitability differences. Results rather tend to point to a statistically and economically significant negative causal effect.

Keywords: Long-Run Profit Rate Differentials, Industry Concentration, Business Segments, Endogeneity

JEL Classification: L10, D40

Suggested Citation

Keil, Jan, Is There a Causal Effect of Concentration on Persistent Profitability Differentials? (January 31, 2018). Industrial and Corporate Change, 2018. Available at SSRN: https://ssrn.com/abstract=2879163 or http://dx.doi.org/10.2139/ssrn.2879163

Jan Keil (Contact Author)

Humboldt Universität zu Berlin ( email )

Berlin
Germany

HOME PAGE: http://www.jankeil.com

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