INPUT TRADE LIBERALIZATION AND MARKUP DISTRIBUTION: EVIDENCE FROM CHINA

Zhengwen Liu and Hong Ma

Economic Inquiry, 2021, vol. 59, issue 1, 344-360

Abstract: We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. (JEL F12, F13)

Date: 2021
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