Are Industries Becoming More Concentrated? The Canadian Perspective

65 Pages Posted: 9 May 2019

See all articles by Ray Bawania

Ray Bawania

Schulich School of Business, York University

Yelena Larkin

York University - Schulich School of Business

Date Written: March 20, 2019

Abstract

Since the late 1990s, U.S. industries have experienced an increase in concentration levels. In this paper, we try to understand the drivers of this trend by asking whether this phenomenon has been echoed in Canada – a large and developed economy with geographic proximity and economic ties to the U.S. We find that Canadian firms have also exhibited signs of consolidation. First, large firms have become more dominant, and the number of TSX publicly traded firms has dropped. Second, firms in industries with the largest increases in product market concentration started to generate higher profit margins. Third, the volume of M&A deals, and horizontal deals in particular, has increased. We argue that the recent changes in concentration can be attributed to an increase in market power, and cannot be fully explained by changes in financial market regulations. We posit that both the U.S. and Canadian economies were affected by two crucial factors that have led to product market consolidation: one, weak antitrust legislation and practices; and two, increasing barriers to entry.

Keywords: product market; concentration; HHI; market power; antitrust; Canada

JEL Classification: G30, G38, L11, L12

Suggested Citation

Bawania, Ray and Larkin, Yelena, Are Industries Becoming More Concentrated? The Canadian Perspective (March 20, 2019). Available at SSRN: https://ssrn.com/abstract=3357041 or http://dx.doi.org/10.2139/ssrn.3357041

Ray Bawania

Schulich School of Business, York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Yelena Larkin (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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