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Trade, import competition and productivity growth in the food industry

Alessandro Olper (), Lucia Pacca () and Daniele Curzi

Food Policy, 2014, vol. 49, issue P1, 71-83

Abstract: Melitz and Ottaviano’s (2008) firm-heterogeneity model predicts that trade liberalization induces a selection process from low to high productivity firms, which translates to an industry productivity growth. A similar firms’ selection effect is induced by market size. In this paper, these predictions are tested across 25 European countries and 9 food industries, over the 1995–2008 period. Using different dynamic panel estimators we find strong support for the model predictions, namely that an increase in import penetration is systematically positively related to productivity growth. The results are robust to measurement issues in productivity, controlling for market size, country and sector heterogeneities, and for the endogeneity of import competition. Interestingly, this positive relationship is almost exclusively driven by competition in final products coming from developed (especially EU-15) countries suggesting that EU food imports are closer substitutes for domestic production than non-EU imports. These results have some potentially interesting policy implications.

Keywords: Import competition; Productivity growth; Food industry; European countries; GMM (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Trade, import competition and productivity growth in the food industry (2014) Downloads
Working Paper: Trade, Import Competition and Productivity Growth In the Food Industry (2013) Downloads
Working Paper: Trade, Import Competition and Productivity Growth In the Food Industry (2013) Downloads
Working Paper: Trade, Import Competition and Productivity Growth in the Food Industry (2013) Downloads
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