A note on the market structure and performance in Korean manufacturing industries

This study attempts to analyze the market structure and performance of Korean manufacturing industries. The study shows the following results. (1) The analysis shows a negative correlation between price-cost margin (PCM) and concentration ratio (CR), which are the variables representing market structure and its performance. This result suggests that Bain's hypothesis [Quart. J. Econ. 65 (2) (1951) 293] cannot be applied to the Korean economy. (2) The analysis on the ratio of advertisement expenses and the ratio of R&D expenses is consistent with what this study predicted at the early stage. Therefore, it is plausible that increasing investment in advertisement and R&D is one of the methods to increase concentration ratio and price-cost margin. (3) In conclusion, the export-oriented policy strongly supported by the government has succeeded in achieving economic growth. From the perspective of industrial organization theory, however, it has distorted the distribution of resources by supporting monopolies and such economic growth seems to have been occurred at the expense of the domestic market. (C) 2004 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.