Market Structure and Profitability in a Transition Economy: Ukrainian Case
How does market power influence profitability? Prior research gives no exact answer. However, theory indicates that the relationship is positive. The aim of this paper is to identify whether and how competition influences profitability in the Ukrainian transition economy. Current study employs linear specifications relating profitability to variables that embody competition factors and industries' specificities. Econometric tests provide evidence that concentration indices have no significant effect on profitability at the nationwide level. Nevertheless, competition possibly matters at the level of regional markets. International trade as a source of competition can be a good disciplinary tool for local producers. The vague nature of the relationship between profitability and concentration may signify that competition is flawed in Ukraine.
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