Industry Concentration in South African Manufacturing Industry: Trends and Consequences, 1972-96

This paper examines industry concentration for the South African manufacturing sector over the 1972-1996 period, for the three digit industry classification. The paper notes both the high level of industry concentration in South African manufacturing, and a rising trend in concentration across a wide range of industries. The paper further explores the impact that industry concentration has on a wide range of indicators of industry performance. We find that increased concentration serves to lower output growth, raise unit labour costs, and to lower labour productivity. The impact on employment, total factor productivity and investment rates based on bivariate examinations of the data are ambiguous. The paper concludes by examining the impact of concentration on employment and investment rates using a dynamic heterogeneous panel estimation methodology. We find that increased concentration unambiguously lowers employment. For investment rates, increased inequality of market share serves to raise investment rates, while falling firm numbers for any given inequality of market share lowers investment rates. The difference can be interpreted as the distinct impact that the pursuit of managerial objectives (large market share promoting further productive capacity expansion) and that market contestability (under falling numbers of firms in an industry, monopolistic incentives to curtail productive capacity rise) have on investment.

Working Paper 023
1 September 2012

2008, Economic Modelling, 26, 241-250
19 September 2012
Publication Type: Working Paper
JEL Code: D29, D49, L11, L5, L6

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social