Competition, Markups, and the Gains from

Chris Edmond, Virgiliu Midrigan and Daniel Yi Xu

No 1183, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: We study the pro-competitive gains from international trade in a quantitative model with endogenously variable markups. We find that trade can significantly reduce markup distortions if two conditions are satisfied: (i) there is extensive misallocation and (ii) opening to trade exposes hitherto dominant producers to greater competitive pressure. We measure the extent to which these two conditions are satisfied in Taiwanese producer-level data. Versions of our model consistent with the Taiwanese data predict that opening up to trade strongly increases competition and reduces markup distortions by up to one-third, thus significantly reducing productivity losses due to misallocation.

Keywords: misallocation; markup dispersion; head-to-head competition (search for similar items in EconPapers)
JEL-codes: F1 O4 (search for similar items in EconPapers)
Pages: 83 pages
Date: 2011, Revised 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Competition, Markups, and the Gains from (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1183

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