Title: Market Structure, Competition and Productivity Growth: Evidence from Canadian Manufacturing Industries
Abstract: Using data for 86 Canadian manufacturing industries from 1990 to 2002, this paper estimates total factor productivity (TFP) growth allowing for non-constant returns to scale and imperfect competition. Somewhat surprisingly, the results show that we cannot reject the null hypothesis of constant returns to scale for 80 industries and that of perfect competition for 55 industries. Although at the aggregate level the standard Solow residual underestimates the actual TFP growth by only 0.2 to 0.4 percentage points, these two series vary substantially at the industry level. The paper also shows that competition, as measured by lower level of rents and markup and higher level of import penetration, is associated with a significantly higher rate of TFP growth. Similarly, the fall in the Herfindahl index and concentration ratio (proxies for a rise in competition) lead to a higher productivity level effect.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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Cited By Count: 1
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