Import competition and industry location in a small‐country model of productivity growth

Colin Davis and Ken-ichi Hashimoto

Review of International Economics, 2021, vol. 29, issue 4, 1046-1064

Abstract: We study how import competition affects the regional concentration of industry location in a small open economy with two regions. Industry concentration is linked with firm‐level investment in process innovation through an import competition effect that is increasing in the market share of imported goods and the productivity differential of domestic firms with the rest of the world. We show that increased import competition, through a larger number of imported goods or a faster international rate of productivity growth, leads to greater regional industry concentration by reducing domestic market entry and decreasing the relative productivity of domestic firms.

Date: 2021
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https://doi.org/10.1111/roie.12535

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Working Paper: Import Competition and Industry Location in a Small-Country Model of Productivity Growth (2019)
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