The purpose of this study is to analyze the relationship between potential foreign competition and domestic market structures, as well as suggest policies for promoting competition for structuring the domestic market.
To effectively implement competition policy, it is necessary to accurately measure and evaluate the market structure. In doing so, figures such as the concentration ratio and Hirschman-Herfindahl Index are widely used, along with the import penetration ratio, which supplements concentration figures to reflect foreign competition. However, these indices focus on the current state of the market structure while ignoring the possibility that changes in market conditions could induce potential competitors.
In Korea, potential foreign competition is one of the factors in determining the relevant market; however, it seems that dynamic externalities such as the response of foreign sectors to changes in market conditions receive relatively little attention. On the contrary, the U.S, Japan, Canada, and the European Union all agree that potential foreign competition should be considered in evaluating antitrust cases. Other countries also adopt a similar approach to antitrust cases by considering the importance of potential foreign competition.
Current period import penetration ratios are statistically and significantly associated with the previous period profit margin, but not with the current period profit margin, which suggests a lag in the effects of potential foreign competition. This time lag effect seems to be due to adjustment costs for trade diversion. Also, ceteris paribus, domestic market structure measured by the concentration ratio is negatively related to the import penetration ratio. That is, the more concentrated an industry, the lower the import penetration ratio. When grouping industries according to their concentration distribution, the above findings become more pronounced. For the group with a concentration ratio greater than the 50th percentile, the existence of foreign potential competition turns out to be more significant. But this is not the case for the group with a concentration ratio lower than the 50th percentile.
In summary, findings of this research are as follows: First, there exists statistically significant potential foreign competition, which occurs with a time lag of one year. Second, a greater degree of potential foreign competition is more associated with highly concentrated industries than with less concentrated industries. It is necessary to consider potential foreign competition when assessing the domestic market structure in order to measure the degree of competition in a more complete manner.
해외부문과의 잠재적 경쟁과 시장구조에 대한 실증분석(Empirical analysis of potential foreign competition and market structures)
제조업을 중심으로(Evidence in Korean manufacturing)
|Series Title; No||정책포럼 / 2004-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||한국개발연구원: KDI 국제정책대학원|