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Institutions and Concentration

36 Pages Posted: 28 Feb 2006  

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Date Written: February 16, 2006

Abstract

In a new dataset of 1.3 million firms in 155 countries, I establish a number of regularities in cross-country differences in economic concentration. Concentration of sales and employment is substantially higher in smaller countries and in less-developed countries; these two factors alone explain roughly half the cross-country variation in concentration. Nevertheless, a number of institutional factors offer additional explanatory power for concentration. Concentration is higher in countries with higher entry costs for new firms, in countries with weaker antitrust policy, in countries with less control of corruption, in countries with weaker rule of law, and in countries with more burdensome regulation. These relationships are especially pronounced in nontradable and investment-intensive industries, suggesting that natural barriers to competition facilitate the monopolization of sectors especially when institutions are weak.

Keywords: Concentration, Institutions, Regulation

JEL Classification: L11, L22, L40, K00, G18

Suggested Citation

Mitton, Todd, Institutions and Concentration (February 16, 2006). Available at SSRN: https://ssrn.com/abstract=885396 or http://dx.doi.org/10.2139/ssrn.885396

Todd Mitton (Contact Author)

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-1763 (Phone)

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