Market Structure and the Intensity of the Competitive Process in the Canadian Manufacturing Sector.

Mobility statistics are direct measures of the intensity of competition; market structure indicators indirect measures. In this regard the most widely employed measure of market structure is the concentration ratio. Despite the fact that structural measures provide only proxies for the extent of competition, they are widely used by professional economic staff during the formulation and administration of competition policy. This paper investigates the appropriateness of this approach. It concludes that while concentration in Canada's manufacturing sector has remained constant, this masks considerable mobility. The paper then investigates the relationship between the main dimensions of concentration and mobility using principal component, canonical correlation, and regression analysis. The main dimension of concentration is related closely to the intensity of greenfield entry and close down exit. The other dimensions of concentration capture the importance of a secondary group of firms and are related to different aspects of intra-industry mobility such as continuing firm turnover. Using regression analysis, the paper finds that the amount of turnover derived from entry and exit is a significant determinant of concentration after scale effects are considered.