Market Growth and Concentration Change in U.S. Manufacturing Industries

• Author: Paul L. Farris
• DOI: 10.1177/0003603X7301800210
• Published date: 01 June 1973
• Date: 01 June 1973
• Subject Matter: Article

MARKET

GROWTH AND CONCENTRATION CHANGE

IN

U.S.

MANUFACTURINIG

INDUSTRIES

by

PAUL

L.

FARRIS·

The

rate

of

market

growth for an industry's output is com-

monly believed to affect inversely the

share

held by the larg-

est

firms, suggesting

that

sales of the leading firms tend to

expand or contract less rapidly than for the industry as a

whole.'

Past

empirical studies have shown an inverse asso-

ciation between

market

growth and change in concentration,

but

the relations found have not been close

nor

the influence

large,"

•Professor of Agricultural Economics,

Purdue

University.

Jour-

nal

Paper

No. 4624,

Purdue

University Agricultural

Experiment

Station, Lafayette,

Ind.

IBain suggested

that

market growth may

act

as a concentra-

tion-deterring influence, although he pointed out

that

what happens in

a given

industry

at

any

particular

time is a result of various concen-

tration-increasing

and

deterring forces [1, p. 213].

2Shepherd examined changes in concentration of 366

Bureau

of

the Census four-digit manufacturing industries between 1947

and

1958

and

reported significant inverse relations between changes

in

concentration

at

the 4-, 8-,

and

20-firm levels

and

percentage growth

as measured both by changes in

industry

employment

and

value of

shipments [13]. He found a closer relationship for industries with

initial four-firm concentration ratios of 50 percent or higher

than

for

all industries combined. Percentage change in numbers of firms in an

industry

was also related inversely to change in concentration.

Nelson related change in industry employment to change in four-

firm concentration between 1947

and

1954 for 369 manufacturing in-

dustries

and

found an overall negative relationship [10, pp. 265-66].

He also reported

that

analysis of 101 industries for the 1935-54 period

gave similar results.

A more recent

study

of 207 industries between 1947 and 1963 by

the

Bureau

of Economics of the Federal Trade Commission found

the

same

inverse

pattern

between

industry

growth

rate

and four-firm concentra-

tion change [8, pp. 76-78]. This study also showed

that

average con-

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