*Innovation and Market Structure: An Empirical Evaluation of the Bounds Approach in the Chemical Industry

20 Pages Posted: 11 Apr 2007

See all articles by Pedro L. Marin

Pedro L. Marin

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Georges Siotis

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Abstract

This paper applies Sutton's [1998]bounds approach to the chemical industry. The approach predicts that (i) the lower bound of the ratio of the 1-firm concentration index to product concentration is bounded away from zero at high levels of product concentration only in high R&D markets and (ii) the lower bound on market concentration is higher and increasing in product concentration in markets with higher R&D intensities. We test these two hypotheses and find that the data strongly support them. A novel feature of our analysis is the use of plant level data in defining products and the classification of products into markets based on end-use.

Suggested Citation

Marin, Pedro L. and Siotis, Georges, *Innovation and Market Structure: An Empirical Evaluation of the Bounds Approach in the Chemical Industry. Journal of Industrial Economics, Vol. 55, No. 1, pp. 93-111, March 2007, Available at SSRN: https://ssrn.com/abstract=978639 or http://dx.doi.org/10.1111/j.1467-6451.2007.00304.x

Pedro L. Marin (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9646 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Georges Siotis

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9312 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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