Vertical Integration and Economic Efficiency In Jordanian Industries

Abstract

The Major Objectives of this study is to measure the degree of vertical integration (VI) in Jordanian industries classified by the 4- digits code of the ISIC, and to examine the relationship between such integration and both economic efficiency and monopoly power. The results of the study indicate that the degree of VI among Jordanian industries varies for some extent from one group to another. But it is more important to mention that a low degree of VI has been found among many important industries. These are the grain mill products, the prepared animal feed, the manufacture of paints, the petroleum refineries, the manufac- ture of electrical industrial machinery and apparatus, and the manufacture of spare parts for motor vehicles. On the other hand, a highest degree of VI among other group has been cleared. This group includes the slaughtering, preparing and preserving meat, Tobacco, and upholstery industries. The study also shows that the VI increases both profits and economic efficiency and reduces costs rather than increasing the monopoly power. Accordingly, the VI is desirable from a social viewpoint, and moreover, it should be encouraged to include the various economic sectors