Trade Policy and Market Power: Firm-Level Evidence

Alan Asprilla, Nicolas Berman (), Olivier Cadot and Melise Jaud ()

No 9050, Policy Research Working Paper Series from The World Bank

Abstract: This paper identifies the effect of trade policy on market power through new data and a new identification strategy. It uses a large data set containing export values and quantities by product and destination for all exporting firms in 12 developing and emerging countries over several years, merged with destination-product-specific information on tariffs and non-tariff barriers. Market power is identified by observing how exporting firms price discriminate across markets in reaction to variations in bilateral exchange rates. Pricing-to-market is prevalent in all regions of the sample, even among small firms, although it is increasing in firm size, in accordance with theory. More importantly, the effect of non-tariff measures is not isomorphic to that of tariffs: the observed pricing-to-market behavior suggests that, although tariffs reduce the market power of foreign firms through classic rent-shifting effects, non-tariff measures alter market structure and reinforce the market power of non-exiting firms, domestic and foreign ones alike.

Date: 2019-10-29
New Economics Papers: this item is included in nep-com and nep-int
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Related works:
Journal Article: TRADE POLICY AND MARKET POWER: FIRM‐LEVEL EVIDENCE (2019)
Working Paper: Trade Policy and Market Power: Firm-Level Evidence (2019)
Working Paper: Trade Policy and Market Power: Firm-level Evidence (2018)
Working Paper: Trade Policy and Market Power: Firm-level Evidence (2018)
Working Paper: Trade Policy and Market Power: Firm-level Evidence (2016)
Working Paper: Trade Policy and Market Power: Firm-level Evidence (2016)
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