Abstract
This study investigated the role of both domestic structural factors and tariff protection in explaining inter-industry differences in profitability in Australian manufacturing industries. At no stage did concentration have a significant effect on profitability at the four-digit level of analysis, in comparison to its observed significant positive effect at the three-digit level. Other structural factors appear to be more important in explaining inter-industry variations in profitability in Australia. The effective tariff rate was negatively associated with profitability, the relationship notably being more highly significant in those industries enjoying higher than average tariff protection. It is suggested that this negative relationship for Australia may be due to a similar phenomenon noted in relation to Canadian manufacturing, namely that tariff protection has led to the permanent creation of too many sub-optimal production units, resulting in lower efficiency and decreased profits. A reduction in the effective rate of tariff protection given to high cost Australian manufacturing industries may therefore yield greater efficiency, as well as at the same time permitting the possibility of increased potential and actual foreign competition.
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