Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, May 8, 2009

When is Concentration Beneficial? Evidence from U.S. Manufacturing

Posted by D. Daniel Sokol

Rigoberto A. López (Agricultural and Resource Economics, University of Conneticut) Elena López (Economics - Universidad de Alcalá) and Carmen Liron-Espana (System Planning, ISO-NE) ask and answer When is Concentration Beneficial? Evidence from U.S. Manufacturing.

ABSTRACT: This article estimates the impact of industrial concentration on market power and cost and then links the ensuing welfare changes to market structure characteristics using a sample of 232 U.S. manufacturing industries. Empirical results indicate that further increases in concentration would enhance welfare in 70% of the industries due to widespread efficiency gains, although these would generally not be passed on to consumers. From a social standpoint, further concentration is more likely to be beneficial in industries with economies of size, high export intensity, which are engaged in consumer-oriented goods, face larger markets, and have low or moderate levels of initial concentration.

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