An Empirical Study On The Convergence Of Chinese Industrial Profit Margin

Profit margin is one of the indicators to evaluate the company's operating results,and it is also an important index to judge whether an industry can gain profit or not.Neo classical economic theory believes that in the long-term competitive environment,the industry profit margins will gradually tend to zero.However,the new classical economic theories' conclusion is based on the extreme assumption that manufacturers must understand the complete information of the market,the product elements have complete separability and no transaction costs.Even under these assumptions,the equilibrium rate of profit is a long-term process.Many scholars believe that in the long run,the difference of profit among different industries will gradually disappear,the profit rate will eventually tend to a certain value;there are also some scholars think that the difference of profit among different industries will continue to exist,for all kinds of barriers,the existence of sunk costs and the limits of entering and exiting activities of enterprises.Therefore,it is necessary to study the convergence of industrial profit margins.In China,the market factors and institutional factors intertwine together,the enterprise environment is complex,corporate behavior and policy factors affect corporate profits together,and this paper is based on this background to test whether the theory of convergence rate of industrial profit is established.Firstly,this paper uses descriptive analysis method to analyze the convergence rate of industrial profit in the whole country and regions in 1994-2014,the results show that the overall level of industry profit margins decline gradually,with the trend of convergence;the regional industry profit rate from high to low is the east,central,northeast and west;Tianjin is located in the eastern region of the best convergence,but its own industry profit margins are very different;while Sichuan province is located in the western region of the worst convergence,but its own convergence is very good.Then,we use the generalized least squares method and the seemingly unrelated regression method to empirically analyze the industry profit rate of the whole country and the region,and get the same result as the descriptive analysis.Finally,based on the empirical results,this paper analyzes the main factors that affect the inter industry profit margin,specially study the main factors that lead to the convergence of Tianjin and Sichuan are different from other provinces which located in the same region.