nep-com New Economics Papers
on Industrial Competition
Issue of 2005‒06‒05
six papers chosen by
Russell Pittman
US Department of Justice

  1. Does Corporate Ownership Matter? Service Provision in the Hospital Industry By Jill R. Horwitz
  2. Hospital Integration and Vertical Consolidation: An Analysis of Acquisitions in New York State By Robert S. Huckman
  3. The determinants of bank margins revisited: A note on the effects of diversification By Santiago Carbó Valverde; Francisco Rodríguez Fernández
  4. Market Size, Trade, and Productivity By Marc J. Melitz; Gianmarco I.P. Ottaviano
  5. How State Governments Implement Federal Policies: The Telecommunications Act of 1996 By Troy Quast
  6. Lobbying Competition Over US Trade Policy By Kishore Gawande; Pravin Krishna

  1. By: Jill R. Horwitz
    Abstract: Three types of firms %uF818 nonprofit, for-profit, and government %uF818 own U.S. hospitals, yet we do not know whether ownership results in the specialization of medical service provision. This study of over 30 medical services in urban, general hospitals (1988-2000) shows that ownership types specialize in medical services according to the profitability of those services. The paper examines three theories to explain the differences: 1) objectives, 2) capital prices, and 3) market characteristics. The findings are best explained by differences in the objectives adopted by hospital types rather than differences in capital constraints faced by them. Preliminary evidence suggests that hospital behavior depends on the ownership form of neighboring hospitals.
    JEL: I1 L3 L2
    Date: 2005–05
  2. By: Robert S. Huckman
    Abstract: While prior studies tend to view hospital integration through the lens of horizontal consolidation, I provide an analysis of its vertical aspects. I examine the effect of hospital acquisitions in New York State on the distribution of market share for major cardiac procedures across providers in target markets. I find evidence of benefits to acquirers via business stealing, with the resulting redistribution of volume across providers having small effects, if any, on total welfare with respect to cardiac care. The results of this analysis--along with similar assessments for other services--can be incorporated into future studies of hospital consolidation.
    JEL: I1 L2
    Date: 2005–05
  3. By: Santiago Carbó Valverde (Department of Economic Theory and Economic History, University of Granada); Francisco Rodríguez Fernández (Department of Economic Theory and Economic History, University of Granada)
    Abstract: Most of the theoretical and empirical literature on bank margins has dealt solely with interest margins. Applying the seminal Ho-Saunders model (JFQA, 1981) to a multi-output framework, we show that the relationship between bank margins and market power (controlling for risk) varies significantly across bank specializations. Using a set of both accounting margins and New Empirical Industrial Organization (NEIO) margins, we find that market power rises significantly with output diversification towards non-traditional activities. These results contribute to explain the paradoxical coexistence of decreasing interest margins and higher market power found in previous studies.
    Keywords: bank margins, specialization, market structure.
    JEL: G21 D40
    Date: 2005–06–01
  4. By: Marc J. Melitz; Gianmarco I.P. Ottaviano
    Abstract: We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences - and endogenous differences in the `toughness' of competition across markets - in terms of the number and average productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower markups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modeling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous markups.
    JEL: F12 R13
    Date: 2005–06
  5. By: Troy Quast (University of Florida)
    Abstract: This paper examines the rates set by state public utility commissions (PUCs) that competitors must pay to access the local loop of the largest incumbent U.S. telecommunications suppliers (RBOCs). Employing a unique data set and dynamic panel data regressions, the results indicate that the rates are influenced by factors beyond local costs. Specifically, rates in the smaller states in each RBOC region are strongly influenced by the largest state in the region. Rates are lower in the period immediately before the RBOC applied for Section 271 approval in the state and where the level of competitive entry is lower, while they are higher in states where the governor is a Republican. The analysis suggests that this cornerstone of the Telecommunications Act of 1996 may been applied inconsistently across states and information spillovers should be considered when state agencies are charged with implementing federal policy.
    Keywords: telecommunications, regulation, federal government, state government
    JEL: H70 L50 L96
    Date: 2005–05–29
  6. By: Kishore Gawande; Pravin Krishna
    Abstract: Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for US trade policy. The theoretical framework used is the well-known Grossman-Helpman model of trade policy determination suitably modified to account for the cross-sectoral use of inputs in production (the input-output matrix). Our empirical results, using US trade data, validate the predictions of the theoretical model with lobbying competition. Trade protection is found to be higher in industries with organized lobbies but lower when there are organized downstream users of the industry's output. Lobbying competition is additionally interesting as a candidate explanation for an empirical puzzle in the literature concerning the apparently nearly "welfare-maximizing" behavior of the US government in setting trade policy. Our estimates diminish the magnitude of the puzzle somewhat, but do not provide a full quantitative resolution of this question.
    JEL: D72 D78 F12 F13
    Date: 2005–05

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