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Africa Region Working Paper Series No. 96 Industry Concentration in South African Manufacturing: Abstract This paper is a result of a wider policy research and knowledge work on growth and jobs issues in South Africa, which the Bank promotes in collaboration with leading South African researchers. The objective is to contribute to major economic and policy issues facing South Africa as it embarks on the second decade of its democratic transition. These issues include growth and jobs, export competitiveness, service delivery, small and medium-size enterprise development and investment climate, industrial concentration, infrastructure and growth, municipal and financial management, land reform, regional integration, trade and poverty, HIV/AIDS, and––especially important––service delivery. This paper examines industry concentration for the South African manufacturing sector over the 1972-1996 period (including the last year of the last manufacturing industry census data available) for the three-digit industry classification. The paper documents both the high level of industry concentration in South African manufacturing, and a rising trend in concentration across a wide range of industries. The paper further explores the impact that industry concentration has on a wide range of indicators of industry performance. It finds that increased concentration serves to lower output growth, raise unit labour costs, and to lower labour productivity. The impact of concentration on employment, total factor productivity and investment rates, based on bivariate examinations of the data, is ambiguous. The paper concludes by examining the impact of concentration on employment and investment rates using a dynamic heterogeneous panel estimation methodology. It finds that increased concentration unambiguously lowers employment.Full
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