IOSR Journal Of Humanities And Social Science (IOSR-JHSS) Volume 22, Issue 7, Ver. 4 (July. 2017) PP 06-17 e-ISSN: 2279-0837, p-ISSN: 2279-0845. www.iosrjournals.org DOI: 10.9790/0837-2207040617 www.iosrjournals.org 6 | Page Impact of Market Concentration on the Growth of Selected Manufacturing industries in India using Mauldon Distribution Baishali Bagchi 1 , Malabika Roy 2 , Ajitava Raychaudhuri 3 1 (Department of Economics, Jadavpur University, India) 2 (Department of Economics, Jadavpur University, India) 3 (Department of Economics, Jadavpur University, India) Abstract: This paper tries to explain whether an industrial sector belonging to Indian Manufacturing Industries with high (or low) market concentration ratio has a high (or low) growth rate. In addition, the paper checks whether the k firm concentration in an industry (the share of market supplied by the top k firms in an industry) improves or diminishes with an increase or decrease in n (number of firms), and how the growth pattern of the industry behaves alongside. As number of firms (n) in an industry increases, k firm concentration in an industry (C) may increase or decrease. However, this does not necessarily imply that the market concentration has improved or deteriorated, because, the size of the industry itself (n) has changed. The existing measures of concentration do not provide a benchmark which defines a significant concentration level for a specific value of n, in comparison to which an actual market concentration C can be identified as significant. This paper applies the Mauldon Distribution to provide a hypothetical benchmark for an industrial sector where it is assumed that none of the firms have any advantage in terms of efficiency, so that they can affect the market concentration. Finally the paper tries to explain changes in the growth pattern in different industrial sectors with changes in number of firms in those industries, by comparing growth pattern with the movement of their k firm concentration ratios. Keywords: Market concentration, Mauldon Distribution, Growth, Critical concentration ratio. I. INTRODUCTION Market concentration of an industrial sector is primarily based on the share of the output produced or supplied by each of the firms within a specific industrial sector. On the other hand, the output growth of an industry is simply measured by checking the change in total output between two consecutive periods, and depending on this change in output, it is determined whether an industrial sector is growing or deteriorating. Next, depending on the rate of growth (if the sector shows an increase in output over time), it is determined whether a specific industrial sector is showing a higher or lower growth in comparison to other industrial sectors. Thus, high or low growth rate of an industrial sector is always a concept relative to other industrial sectors with which it is compared. Most of the commonly used measures of market concentration depend on the share of total output supplied or produced by each firm in an industrial sector. Hence, changes in market concentration of one or more firms in an industry imply a change in that particular industry‟s total output and hence can affect that particular industry‟s growth. In light of the above discussion, this paper tries to check whether an industrial sector with high (or low) market concentration ratio has a high (or low) growth rate. Alongside, the paper also tries to find out the effect of changes in number of firms (depicted as n) in an industrial sector on its market concentration, and in turn, on its growth pattern. Precisely, the paper checks whether the k firm concentration in an industry improves or diminishes with an increase or decrease in n (number of firms), and how the growth pattern of the industry behaves along with it. Thus, an attempt can be made to explain whether and how the growth pattern of an industry is getting affected by the new entrants in the market (an increase in n), or the exodus of firms from an industry (a decrease in n). A study in 2006 [1] has revealed that the stability of ranks (of market share) might not capture the actual changes in market share and the level of competition faced by the firms. Studies have also revealed that higher market share or market concentration does not necessarily imply higher profit [2]. Thus, it is important to know how exactly market shares of different industrial sectors with different n can be compared and in which direction do these market shares and the growth patterns of these industries move with changes in n. In addition, this study also brings up another important question: when can a specific sector be identified as “concentrated”? In this respect, a few standard measures of market concentration available in literature and their empirical studies have been discussed next. The most commonly used method for calculating market concentration is the Concentration Ratio.