Market structure, external exposure and industry profitability: Evidence from Taiwan

Song Ken Hsu, Ming Fang Tsai, Chih Hai Yang

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

This article aims to investigate empirically the influences of concentration, exports, and exchange rate on industry profitability in a small open economy, in Taiwan. Developing a simple theoretical framework and utilizing panel data of four-digit manufacturing industries over the period 1986-96 to test our findings indicate that concentration has a positive impact on profit margin, while the impacts of export intensity and external exposure are significantly negative. This result indicates that export-intensive industries tend to have a lower profitability in Taiwan, because export firms act as price takers in international markets. Moreover, the exchange rate is found to have a relatively strong and significant effect on industry profitability, whereby the devaluation of the New Taiwan Dollar hurts more those industries with a higher share of imported inputs during the sample period.

Original languageEnglish
Pages (from-to)201-214
Number of pages14
JournalInternational Economic Journal
Volume22
Issue number2
DOIs
StatePublished - Jun 2008

Keywords

  • Concentration
  • Exchange rate
  • Export
  • Industry profitability

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