Markups, Market Imperfections, and Trade Openness: Evidence from Ghana

Kaku Attah Damoah

No 9079, Policy Research Working Paper Series from The World Bank

Abstract: This paper investigates the impact of Ghana's World Trade Organization (WTO) accession on firm-level product and labor market imperfections. The paper exploits a rich dataset of firm-level information to estimate both markups and the degree of monopsony power enjoyed by manufacturing firms. The results indicate that price-cost margins declined while the degree of monopsony power increased in the wake of WTO accession. These diverging dynamics suggest that firms compress real wages to offset loss of market power in the product market due to increased international competition. This gives rise to an increase in the market imperfection gap, which gradually erodes the pro-competitive gains from trade. The paper contributes to the literature by identifying channels through which allocative inefficiencies and misallocation can persist even after trade liberalization.

Keywords: International Trade and Trade Rules; Rural Labor Markets; Labor Markets; Common Carriers Industry; Food&Beverage Industry; Construction Industry; Business Cycles and Stabilization Policies; Plastics&Rubber Industry; Pulp&Paper Industry; Textiles; Apparel&Leather Industry; General Manufacturing; Trade Policy; Trade and Multilateral Issues; Rules of Origin (search for similar items in EconPapers)
Date: 2019-12-11
New Economics Papers: this item is included in nep-afr, nep-com, nep-ind and nep-int
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http://documents.worldbank.org/curated/en/41448157 ... dence-from-Ghana.pdf (application/pdf)

Related works:
Journal Article: Markups, Market Imperfections, and Trade Openness: Evidence from Ghana (2021)
Working Paper: Markups, Markets Imperfections, and Trade Openness: Evidence from Ghana (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9079

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