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Capital Markets and Industrial Development: A Comparative Study of Brazil, India, Mexico, and the United States, 1840-1930
Working paper
Stephen Haber
November 1994 |
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This paper seeks to understand the conditions under which imperfections in capital markets may persist for long periods of time and the long-run efficiency consequences of those imperfections. It therefore examines the institutional history of textile mill financing in four countries, two of which had highly imperfect capital markets (India and Mexico), one of which had a relatively efficient capital market (the United States), and one of which made the transition from small, segmented, and concentrated capital markets to one which was characterized by a high degree of openness and efficiency by LDC standards (Brazil).
In order to understand the efficiency consequences of capital market imperfections the paper develops four firm concentration ratios and Herfindahl indices of the cotton textile manufacture in all four countries. I focus on textiles because it was the largest, most important industry in the three LDCs under examination and because textiles should be characterized by near perfect competition. High levels of industrial concentration in the cotton textile industry would indicate the presence of a barrier to entry.Since there were no technological or legal barriers to entry into the industry, high levels of concentration would point to financial barriers to entry. |
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