Abstract
This article aims to test Sutton's 'lower bounds' approach on the analysis of market concentration in a small open economy like Taiwan. Exporting, which is important to a small open economy, is also considered in order to investigate the role of foreign competition on the market structure. Using a stochastic frontier approach, the estimate findings are in accordance with Sutton's predictions, whereby the lower bounds for high advertising and/or R&D-intensive industries are higher than those for low advertising and/or R&D-intensive industries in Taiwan. At the same time, the lower bounds of concentrations for export-intensive industries do not differ significantly from that of nonexport-intensive industries. The deviations from the lower bound are explained by industry characteristics such as the cost disadvantage ratio, the share of small and median-size enterprises, turnover rate and growth rate.
Original language | English |
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Pages (from-to) | 2389-2401 |
Number of pages | 13 |
Journal | Applied Economics |
Volume | 39 |
Issue number | 18 |
DOIs | |
State | Published - Oct 2007 |