joint with Paola Bordón
This paper investigates the role of endogenous sunk costs in the market structure of the vocational higher education sector. In particular, we take advantage of the enrollment expansion in Chile 2005-2018 to analyze the relationship between market size and structure. Our findings support the notion that market size is negatively correlated with market concentration. However, the lower bound of concentration is above zero, contradicting the existing evidence for labor-intensive sectors. Using panel enrollment data and a staggered difference-in-differences method, we identify that the expansion of large institutions counters the expected decrease in concentration. In particular, the entrance of large institutions into new geographic areas impacts small institutions by decreasing their enrollment by 75\% and reducing their offer by 60\% programs per major. Our findings indicate that the concentration trends align with Sutton’s endogenous sunk cost theory, where factors such as advertising serve as endogenous sunk costs that shape the market structure even in a labor-intensive sector.