Price-Cost Margins and Economic Integration: How Important is the Pro-Competitive Effect?
AbstractIn this paper we examine whether the conventional result of a greater degree of integration leading to lower price-cost margins (i.e., the pro-competitive effect), would hold when two countries integrate by forming a common market. We propose a general framework of reference, in order to assess the extent of the pro-competitive effect when the role of other variables is allowed for, both for a “small” and “large” common market. By solving the model, the price-cost margin of domestic firms would depend on a set of variables in addition to trade costs with the partner country, which might eventually offset the conventional result.
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Bibliographic InfoPaper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 04-02.
Length: 14 pages
Date of creation: Oct 2004
Date of revision:
Economic integration; pro-competitive effect; price-cost margins;
Other versions of this item:
- Oscar Bajo-Rubio & Carmen Díaz-Roldán & Antonio G. Gómez-Plana, 2004. "Price-cost margins and economic integration: How important is the pro-competitive effect?," Economic Working Papers at Centro de Estudios Andaluces E2004/62, Centro de Estudios Andaluces.
- Oscar Bajo-Rubio & Carmen Díaz-Roldán & Antonio G. Gómez-Plana, . "Price-Cost Margins and Economic Integration: How Important is the Pro-Competitive Effect?," Working Papers on International Economics and Finance 04-02, FEDEA.
- F15 - International Economics - - Trade - - - Economic Integration
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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