Competition, Markups, and the Gains from International Trade

Chris Edmond, Virgiliu Midrigan and Yi Xu ()

American Economic Review, 2015, vol. 105, issue 10, 3183-3221

Abstract: We study the procompetitive gains from international trade in a quantitative model with endogenously variable markups. We find that trade can significantly reduce markup distortions if two conditions are satisfied: (i) there is extensive misallocation, and (ii) opening to trade exposes hitherto dominant producers to greater competitive pressure. We measure the extent to which these two conditions are satisfied in Taiwanese producer-level data. Versions of our model consistent with the Taiwanese data predict that opening up to trade strongly increases competition and reduces markup distortions by up to one-half, thus significantly reducing productivity losses due to misallocation. (JEL D43, F12, F14, L13, L60, O47)

JEL-codes: D43 F12 F14 L13 L60 O47 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20120549
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Citations: View citations in EconPapers (257)

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Related works:
Working Paper: Competition, Markups, and the Gains from International Trade (2013)
Working Paper: Competition, Markups, and the Gains from International Trade (2013)
Working Paper: Competition, Markups, and the Gains from International Trade (2012)
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