The Lerner index is a measure of the market power, which is the ability of pricing above marginal cost. This measure serves as a theoretical and empirical tool for modeling market structure. In this paper, the Lerner indices are estimated for manufacturing industries of chemicals, industrial chemicals, petroleum refineries, miscellaneous petroleum and coal products, rubber and plastic products in Turkey. The econometric model which is used in this study requires data on capital stock. However, data on capital stock is not available in statistical databases. Therefore, in this paper the capital stock is calculated using data on investment and depreciation rate. As an alternative to this, the power capacity is used as a proxy for capital stock. Results show that the second approach yields lower Lerner index. Another finding is that the type of ownership (private or public) does not make significant difference in Lerner index estimates. Finally, some industries using a large share of capital in their production process have higher market power.
Key words: Market power, Lerner index, Price-cost margin, Petrochemicals, Solow residuals. JEL Classification: L10, L65, L71. Article Language: EnglishTurkish
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