Academic journal article International Advances in Economic Research

The Market Structure of the US Economy

Academic journal article International Advances in Economic Research

The Market Structure of the US Economy

Article excerpt

JEL L10

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Shepherd ("Causes of Increased Competition in the U. S. Economy, 1939-1980," Review of Economics and Statistics, 64, 1982) examined the market structure of the US economy. Shepherd finds 76.7% of the US economy is effectively competitive, 18% is tight oligopoly, 2.8% is dominant firm, and 2.5% is pure monopoly. Over the ensuing decades, the US economy witnessed some changes: increase in imports, large merger movement of the 1980s, change in some sectors' shares of the GDP, large cut back in antitrust activities, and increase in deregulation during the 1980s, especially during the Reagan administration. These changes have different effects on market concentration. As such, an update of Shepherd's work is needed and that is the focus of this paper.

In assessing the market structure, I use the 1997 four-firm concentration ratio. Knowing its shortcomings as a measure of market structure, correction methods are used to remedy these shortcomings. Corrections used are:

* Overaggregation: It exists as a result of broadly-defined industries used in the NAICS. To adjust for overaggregation, I use the weighted average [CR.sub.4] with the value of shipment used as weight. Eighty-three industries are modified for this shortcoming.

* Underaggregation: It exists as a result of narrowly-defined industries used in the NAICS. To adjust for underaggregation, I use a combined [CR. …

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