Profitability,concentration and trade flows: Issues of non-linearity and exogeneity

This paper deals with the econometric estimation of a traditional profitability model employing cross-section data for 110 4-digit Canadian manufacturing industries for the period 1972–1976. A series of estimations and statistical tests suggest that the relationship between industry price—cost margins and the Herfindahl index of concentration is non-linear, non-monotonic but exhibits an everal upward trend across concentration classes. Empirical evidence regarding the disciplinary effect of imports does not support the import competition hypothesis.