Concentration, Tariff Protection and Industrial Performance in South Africa

Fourie, F. C. v. N.; Smith, Andy

doi:10.1111/j.1813-6982.1993.tb01215.x

Cited by 9 publications

(9 citation statements)

References 4 publications

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“…Closer scrutiny showed that concentration indeed had stronger predictive qualities amongst stable industries, thus confirming their expectation -but again making the uncovering of underlying relationships more complex. To make matters worse, in producer good industries changes in concentration did not influence profitability levels at all (see also Fourie and Smith, 1993 for South African results). (c) Above it was demonstrated how the literature was initially divided over whether concentration was indicative of market power or efficiency, and how later studies suggested that both these arguments might be complementary rather than mutually exclusive (Schmalensee, 1985;Scott and Pascoe, 1986;Amato and Wilder, 1988;and Martin, 1988).…”

Section: Saje V66(4) P576mentioning

confidence: 95%

“…Such conditions imply that any single equation structure-performance test based on OLS estimation will produce biased and inconsistent estimates. To deal with endogeneity, expected linkages have to be specified and estimated within the context of a simultaneous system (Geroski 1982;Clarke and Daveis 1982;Reid 1989;Fourie and Smith 1993). Indeed, Geroski (1982) stated 1998 categorically that for a concentration-profits test to be valid a simultaneous equation approach was absolutely essential.…”

Section: Endogeneity and Simultaneitymentioning

confidence: 99%

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The Concentration ‐ Profits Stalemate I: Causality and Interpretation Problems

Fourie¹,

Smith²

1998

South African J Economics

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The industrial economics literature has been preoccupied with the purported link between industry structure and industry performance since the seminal study by Bain (1951). Traditionally, a positive link between concentration and profitability was enough to prove that competitive market forces had been neutralised at high concentration levels. By the mid-1970s the structure-conduct-performance (SCP) paradigm was entrenched as the dominant doctrine in industrial economics, particularly in the United States. It offered the intellectual rationale to justify competition (or antitrust) policies that favoured structural remedies or at the very least restricted mergers and acquisitions. However, various forces were at work that would irrevocably change the concentration-profits landscape. From the early 1970s a number of specification and interpretation difficulties started to blur the structure-performance link. Moreover, the appropriateness of using cross section techniques to test the concentration-profits hypothesis was increasingly challenged. In a parallel development a group of writers, which might be broadly labelled the 'Chicago School', aggressively challenged the structuralis t position. Led by Demsetz (1973), they maintained that evidence of a positive relationship between concentration and profitability was not 1998 SAJE v66 (4) p559 indicative of monopoly abuse but rather of superior efficiency. The research and policy debate flowing from the conflicting nature of these two developments drove the prolific concentration-profits literature for the next decade or two. Yet, no matter how many additional studies were completed, the mainstream or 'Harvard' approach and the Chicago School were not able to resolve their differences, nor was the mainstream view able to reconcile the in-house tensions that increasingly troubled its SCP doctrine. Together these forces pushed the concentration-profits debate to a point of "gridlock" (Bresnahan, 1989(Bresnahan, :1013 and a growing realisation that on its current course the debate could make no progress towards resolving the controversy. The impasse has met with various responses. Most notable was the emergence of the New Industrial Organisation (NIO) and New Empirical Industrial Organisation (NEIO) approaches. The common feature was a deep frustration with many weaknesses that plagued the cross section method of hypothesis testing. The New IO approach embraced rigorous theoretical modelling of market conduct, used sophisticated oligopoly and game theory with less emphasis to empirical testing, and shifted its focus from broad generalisations to generating "stylised facts", i.e. propositions that apply only to certain industries at certain times or under specific circumstances. The NEIO response, on the other hand, was to reaffirm the commitment to empirical testing but to apply greater theoretical rigour to its method of inquiry. Industry-specific study replaced cross section study. Neither New IO nor NEIO have been able to generate a conclusive set of answers about t...

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Section: Saje V66(4) P576mentioning

confidence: 95%

Section: Endogeneity and Simultaneitymentioning

confidence: 99%

The Concentration ‐ Profits Stalemate I: Causality and Interpretation Problems

Fourie¹,

Smith²

1998

South African J Economics

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“…Given the lack of a tight relationship between available measures of accounting profits and the theoretical construct of economic profitability, obtaining a satisfactory empirical measure of economic profitability is a problem. *(8) In this study two measures of profitability used by Fourie and Smith (1993) 1999 SAJE v67 (2) p300 were considered: L-profit and A-profit (Appendix for definitions). Variables reflecting labour quality or productivity: Two variables that reflect the human capital or skill of the work force are used, i.e.…”

Section: Saje V67(2) P297mentioning

confidence: 99%

“…The index will be zero in a perfectly competitive industry where price equals marginal cost. L-profit thus is an indicator of pricing conduct and is frequently used in studies investigating industrial behaviour (Reekie 1984;Leach 1992;Fourie and Smith 1993). Given the format of the IDC data, L-profit was calculated as gross operating surplus divided by total production, where gross operating surplus = (net output -wages) and net output = value added.…”

Section: Saje V67(2) P313mentioning

confidence: 99%

Concentration, Labour Quality and Wages in the South Concentration, Labour African Manufacturing Sector

Smit¹

1999

South African J Economics

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“…Consequently, L-profit is a useful indicator of pricing conduct, which explains its frequent use (e.g. Reekie 1984, Leach 1992and Fourie and Smith 1993. L-profit is normally calculated as (net output -wages)/gross output.…”

Section: (B) Profitsmentioning

confidence: 99%