Market Power and Industrial Performance in Pakistan

Using a panel of eight Pakistani manufacturing industries, We have examined the changes in price-cost margin (gross profitability) during 1998-2009. In this study the traditional industrial organization approach of Structure-Performance has been applied to analyze the effects of concentration and import intensity on price-cost margins. It has been found that market concentration measured by four-firm concentration leads to high price-cost margin. Imports have the tendency to make the domestic firms more c competitive, but their effect on more-concentrated firms is smaller as compared to non-concentrated firms. The minimum efficient scale and assets of industry have positive effects on margins while capital intensity has been found to reduce gross profitability.