Trade‐Adjusted Concentration Ratios in the US Manufacturing Sector

Abstract

This paper incorporates international trade into the four‐firm concentration ratio to get a more realistic measure of market structure in the US manufacturing sector using 1997 and 2002 NAICS data. As expected, trade‐adjusted CR₄ is significantly lower than the published CR₄. Moreover, the effect of international trade is higher in 2002 than in 1997, offsetting the increase in domestic concentration and leaving the US manufacturing sector in 2002 as competitive as it was in 1997. Furthermore, different tests are used to check the validity of the results. All of them confirm that trade‐adjusted CR₄s are significantly lower than their published counterparts.