Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: The paper studies the persistence of profit and its determinants in emerging markets. We apply Markov chain analysis, dynamic panel GMM estimation, and quantile regression techniques to a panel of approximately 3,000 Ukrainian companies. The empirical results show a moderate level of profit persistence, as well as a relatively low speed of adjustment to the steady-state profit level, thus providing no support for the hypothesis that there is a lower persistence of profits in emerging markets due to more intense competition. Regarding the determinants of firm profit in an emerging market economy, the findings from alternative methods reveal that ownership structure and regional location of the firm have a significant impact.

Keywords: profit; persistence; convergence; markov chain analysis; Ukarine

JEL-codes: G30; G32

32 pages, November 12, 2008

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