Do Prices Determine Vertical Integration?
Laura Alfaro (),
Paola Conconi (),
Harald Fadinger and
Andrew F. Newman
Review of Economic Studies, 2016, vol. 83, issue 3, 855-888
A number of theories in organizational economics and industrial organization suggest that vertical integration, while costly, increases productivity. It follows from firms' maximizing behaviour that higher prices in the product market ought to induce more integration. Trade policy provides a source of exogenous price variation to assess this prediction: higher tariffs should lead to higher prices and, therefore, to more integration. We construct firm-level vertical integration indices for a large set of countries and industries and exploit variation in applied most-favoured-nation tariffs to examine the impact of tariffs on firm boundaries. The empirical results provide strong support for the view that higher output prices generate more vertical integration. Our estimates of the average price elasticity of vertical integration are in the range 0.4–2.
References: Add references at CitEc
Citations: View citations in EconPapers (52) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Do Prices Determine Vertical Integration?” (2016)
Working Paper: Do Prices Determine Vertical Integration? (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:83:y:2016:i:3:p:855-888.
Access Statistics for this article
Review of Economic Studies is currently edited by Andrea Prat, Bruno Biais, Kjetil Storesletten and Enrique Sentana
More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().