The hhi is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. The impact of competition on debt ratio of manufacturing. As part of this, i would like to calculate the herfindahlhirschman index. Jan 22, 2019 the herfindahlhirschman index hhi is a slightly more advanced measure of market concentration than the fourfirm concentration ratio. Banking sector ripe for consolidation venture magazine. I want to calculate the concentration of employment in a specific sector in a specific year.
It allows user to generate new hhi variables for large data panels and export output in table. Estimating the lerner index for the banking industry. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the hhi is. Low transaction costs the transaction costs for trading hshares index futures and options are lower. Stata module to compute herfindahl index, statistical software components s457512, boston college department of economics, revised 30 aug 2012. Hh and e containing the herfindahlhirschman and entropy. The closer a market is to being a monopoly, the higher the markets concentration and the lower its competition. Association of hospital market concentration with costs of. Herfindahlhirschman index, hhi technology and ip law. Stata module to generate herfindahlhirschman index hhi variables. Feb 19, 2020 the herfindahlhirschman index hhi for manufacturing industries only in the u.
Department of justice uses to determine whether a monopoly is forming. The market concentration hhi is calculated by squaring the market share of each bankfirm competing in a market, and then summing the resulting numbers. The herfindahl index is a measure of the size of firms in relation to the industry and an indicator. Stata load programs are used to load the ascii or csv data files into stata. They discussed about hhi index which is usually used to evaluate the competitiveness of firms or industries. It is calculated taking the market share of each firm in the market, squaring each one and adding up the sum. I would now like to calculate the hhi index based on these two columns. Stata module to generate herfindahlhirschman index hhi.
An index that identifies the level of competition in a given market and helps the u. To calculate the hhi for a proposed merger using the herfindahlhirschman index formula, add the squares of each companys market share. Hhi output value, no mobile market in the world is highly competitive, which. One can classify the competition structure of a market based on this ratio. The total ranges from zero, meaning perfect competition, to 10,000, indicating a monopoly. One measure of competition in an industry is via concentration ratios. Adjusting the herfindahl index for close substitutes. Hhi index for oligopoly is at 1800 or above game theory. This meaures how concentrated the ownership of a company is.
I am using the panel data where i have 10 years of time, 50 states, in. This post describes a convenient way to automate the tabulation of regression outputs in stata for publication. The percentage of total sales is given in the following table. The load programs are provided in stata format and there is one stata load program for each data file. Stata module to compute herfindahl index ideasrepec. On 8 february 2010, flexible index options with flexibility in setting strike prices and expiry months were introduced to facilitate the booking of customized overthecounter option contracts. In this paper we adopt the hhi to perform a preliminary analysis of the just. Herfindahl hirschmann index calculation with 2 variables. The term hhi means the herfindahlhirschman index, a commonly accepted measure of market concentration. Oecd glossary of statistical terms herfindahl index. The maximum possible hhi, one where 100 percent of the market is held by a single monopolist is 10,000, while for example a market with ten participants each with a 10 percent market share would have an hhi of 1,000 and would be regarded as beginning to be an oligopoly.
Imf, 2004, compilation guide on financial soundness indicators, imf, washington dc, appendix vii, glossary. Patient reported outcome measures data linked to nhs hospital episode statistics in england in 201112 were used to analyse the association between market concentration of hospitals measured by the herfindahlhirschman index hhi and health gains for 337 hospitals. Firm percentage of total sales 1 16 2 14 3 12 4 12 5 10 6 8 7. If webpage has list of items, it is given systematic web address. I learned of the passing of albert hirschman on december 11, and while better and more instructive tributes to his life can be read elsewhere, i wanted to focus on a little piece of hirschmans work that i use all the time. Shenzhen investment holdings bay area development co ltd. The doseresponse and treatmenteffect functions related to a reduction in turnover lower than 10% see fig. The inverse herfindahlhirschman index as an effective. Department of justice evaluate whether a merger might create a nearmonopoly. The greater the index is, the more the market share. However i am wondering if somebody can give me some more information how to work with the hhi command function in stata.
According to the, hhi is a strong index to assess the competitive capabilities by sectors and ranges from 0 to 1. Stata module to generate herfindahlhirschman index hhi variables, statistical software components s458203, boston college department of economics. Stock analysis for shenzhen investment holdings bay area development co ltd hhi. Association between market concentration of hospitals and. It allows user to generate new hhi variables for large data panels and export output in table format.
The value of the index is the sum of the squares of the market shares of all firms in an industry. The institute develops standards for information and communication technologies and creates new applications as an industry partner. Hhi index for oligopoly is at 1800 or above game school university of guelph. Using the findit command, stata can search and install userwritten stata. The hang seng china enterprises index hscei is a market capitalisationweighted stock index which is compiled and calculated by hang seng indexes company limited. Hirschman, it is an economic concept widely applied in competition law. The herfindahlhirschman index hhi is calculated for the 50 largest companies manufacturing industries only. Using the findit command, stata can search and install userwritten. Herfindahlhirschman index hhi stands for the herfindahlhirschman index, a commonly accepted measure of market concentration. Herfindahlhirschman index, hhi technology and ip law glossary. I know of the command ssc install hhi, but i do not manage to get it working.
It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. Pdf estimating the lerner index for the banking industry. This widespread adoption has been characterized by diverse composition, with the hhis calculation being largely determined by the nature of the available data. Herfindahlhirschman index an index of market concentration the u. How to calculate fourfirm concentration ratio bizfluent. For example, in 2018, anheuserbusch inbev held about 41% of the u. Stata module to compute herfindahl index muhammad ansari.
Department of justice, the federal trade commission, and state attorneys general have used the herfindahlhirschman index hhi to measure market concentration for purposes of antitrust enforcement. The use of that index also received an institutional endorsement by the u. The two equations are balanced in the number of observations and are therefore estimated using the normal sureg stata command, without any loss in. Farm diversification as an adaptation strategy to climatic. Feb 11, 2020 the herfindahlhirschman index hhi is a commonly accepted measure of market concentration. The herfindahl index h is the sum of the squared firm sizes, all measured as a proportion of total market size. Its defined as the sum of the squares of the market shares of the firms within a sector. If approved, by how much would the postmerger herfindahlhirschman index increase. The degree of concentration is defined as the market share percentage of the market controlled by each firm involved in a given market.
This paper aims to prove that the herfindahlhirschman index hhi, which. Allow the users to download packages that include more than one program file. Stata module to compute herfindahl index semantic scholar. Herfindahl index i am trying to calculate degree of concentration in an industry by using the herfindahl index. An hhi of less than indicates a market with little concentration, which. Efficient use of capital hshares index futures and options are traded on a margin basis. The advantages of the herfindahl index are that it reflects more firms in the industry and it gives greater weight to the companies with larger market shares. Mar 16, 2015 the market concentration hhi is calculated by squaring the market share of each bankfirm competing in a market, and then summing the resulting numbers. The herfindahl index also known as herfindahlhirschman index, hhi, or sometimes hhiscore is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them.
The market was highly concentrated, with herfindahlhirschman index of 3,025. This module should be installed from within stata by typing ssc install hhi. Nationwide databases are delivered from the hcup central distributor in either ascii format nis, kid or csv format neds, nrd. It has achieved an unusual degree of visibility for a statistical index because of its use by. Following the immediate success of the hshares index futures, the hshares index options were introduced in 14 june 2004. Now have done all the setting which necessary to program the stata to download files from website. Department of justice 21 and the european commission 20, though a number of di erent issues should be examined to arrive at a full and informed view of a merger 11. Debt specialization and performance of european firms. Hospital market concentration was assessed using a variableradius herfindahlhirschman index hhi in the 2003, 2006, and 2009 hospital market structure files. The other index commonly used to measure air transport concentration is the herfindahlhirschman index hhi huber, 2009.
The adoption and use of the hirschmanherfindahl index in. Some notes on applying the herfindahlhirschman index 5 oligopolies with partially cooperative. Setup and usage first, youll need to be familiar with program in stata, which essentially is a function or macro to be called elsewhere in the. Nautical chart is a representation of a particular navigation area with the main purpose to ensure safe navigation of ships.
Where can i locate the concentration ratio and herfindahl. The herfindahlhirschman index hhi is a commonly accepted measure of market concentration. Fast execution a costeffective way to track and establish broad market exposure linked to the performance of hshare companies. Hhi index for oligopoly is at 1800 or above game theory set of tools for from econ 2100 at university of guelph. Herfindahlhirschman and entropy t develop a stata command for markets whose. Innovations for the digital society of the future are the focus of research and development work at the fraunhofer hhi. It is calculated by squaring the market share of each firm competing in a market and then summing the.
A stochastic frontier approach article pdf available in applied financial economics 242. Hi i need to calcualte whats called a herfindahl index. How to calculate the herfindahlhirschman index bizfluent. The scale goes from zero to 10,000, with 10,000 indicating that a single company controls 100% of the market share in a given industry.
Stata module to generate herfindahlhirschman index. Charts one of the basic activities of hhi is construction, production, publishing and maintenance of charts in analogue format paper charts and digital format enc. This module should be installed from within stata by typing ssc install hhi5. The interpretation of hhindex output value when used as mobile. The hhi is basically a measure of market concentration, but when inverted, it is an effective number of whatever. The hhi of a market is calculated by summing the squares of the percentage market shares held by the respective firms. Munich including stock price, stock chart, company news, key statistics, fundamentals and company profile. To this end, we chose the herfindahlhirschman index hereafter hhi which is mostly used in finance to measure market concentration, and has.
The hhi number can range from close to zero to 10,000. Rhoades, of the boards division of research and statistics, prepared this technical note. Cases share of that market was 27 percent, while fiat comprised just percent of the market. For example, suppose i have a firm with 10 shareholders, each holding the following percentage the total usually adds up to less than 100% as some are missing. This content was copied from view the original, and get the alreadycompleted solution here. Stata for downloading files from web statistics and. Hhi index for oligopoly is at 1800 or above game theory set of tools for. Data were analyzed from november 19, 2016, through march 2, 2017. Since its introduction by tuckman and chang nonprofit volunt sector q 204. Hhi index for oligopoly is at 1800 or above game theory set. Download all the websites which is listed the items you want to download. What i like to do is to store all control variables in a macro controls.
Jul 31, 2018 the term hhi means the herfindahlhirschman index, a commonly accepted measure of market concentration. Introduction market power is commonly defined as the ability to profitably charge prices above the competitive level for a significant period of time. Hirschman, it is an economic concept widely applied in competition law, antitrust and also technology management. Dear statalist, i have the following hypothetical trade dataset which contains imported items by importer. First, before we calculate hhi using stata, install the package. Prior to the merger, the market for fourwheeldrive tractors consisted of five firms. The module supports multiple variables and group ids and allows user to export output in table format csv comma delimited. The herfindahlhirschman index, better known as the herfindahl index, is a statistical measure of concentration. The herfindahlhirschman index hhi is a slightly more advanced measure of market concentration than the fourfirm concentration ratio. The capital outlay is much less than buying a hshare companies portfolio. However, it is important to remark that the results are more relevant and reliable for an hhi index above 60 as for the majority of our firms in the sample the hhi index is above 75 i.
1630 1307 1322 1603 911 912 1549 1544 1315 1564 150 1448 415 1028 23 633 717 428 773 1346 441 430 860 591 1316 366 17 604 972 1139 1187 595 830 1418 305 1183 1363 976 932 876 1127 776