MARKET-DISCIPLINE EFFECTS OF TRADE LIBERALIZATION: MICRO-LEVEL EVIDENCE FROM ECUADOR, 1997-2003

Sara A. Wong ()

Applied Econometrics and International Development, 2007, vol. 7, issue 2, 121-134

Abstract: This paper analyses pro-competitive effects of increased trade openness in the manufacturing industry in Ecuador. The data comes from the survey of manufacturing and mining industries in Ecuador for the years 1997-2003. Estimation procedures on both industry- and establishment-level data try to identify trade policy effect on price-cost margins, using import penetration as the trade variable, and controlling for a number of industry-specific effects that may affect profitability. The results suggest that there has been a market-discipline effect of trade liberalization in Ecuador: there is a reduction in price-cost margins when import penetration increases, especially in manufacturing establishments with larger market shares.

Keywords: market structure; trade liberalization; micro-level data; Ecuador (search for similar items in EconPapers)
JEL-codes: F13 L11 (search for similar items in EconPapers)
Date: 2007
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