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The Impact of Imports on Price-Cost Margins: An Empirical Illustration

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  • Lopez, Rigoberto A.
  • Lopez, Elena

Abstract

This article decomposes the impact of imports on domestic price-cost margins into separate price and cost effects. Using data from 24 food-processing industries, the empirical results show that although the direct impact of imports on prices is always negative, a positive net impact on price-cost margins occurs in industries characterized by low own-price elasticity of demand and diseconomies of scale. Further results show that the disciplining effect of imports is more preponderant the lower the degree of domestic competition.

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Bibliographic Info

Paper provided by University of Connecticut, Food Marketing Policy Center in its series Research Reports with number 25153.

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Date of creation: 2001
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Handle: RePEc:ags:uconnr:25153

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Keywords: Market power; imports; market structure; international trade; food industry; Agribusiness; Demand and Price Analysis; International Relations/Trade;

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References

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  1. Neumann, Manfred & Bobel, Ingo & Haid, Alfred, 1985. "Domestic concentration, foreign trade and economic performance," International Journal of Industrial Organization, Elsevier, vol. 3(1), pages 1-19, March.
  2. Levinsohn, J., 1991. "Testing the Imports-As-Market-Discipline Hypothesis," Working Papers 272, Research Seminar in International Economics, University of Michigan.
  3. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  4. de Ghellinck, Elisabeth & Geroski, Paul A & Jacquemin, Alexis, 1988. "Inter-industry Variations in the Effect of Trade on Industry Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 37(1), pages 1-19, September.
  5. Geroski, P. A., 1982. "Simultaneous equations models of the structure-performance paradigm," European Economic Review, Elsevier, vol. 19(1), pages 145-158.
  6. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
  7. Haubrich, Joseph G. & Lambson, Val Eugene, 1986. "Dynamic collusion in an open economy," Economics Letters, Elsevier, vol. 20(1), pages 75-78.
  8. Marvel, Howard P, 1980. "Foreign Trade and Domestic Competition," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 103-22, January.
  9. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
  10. Pagoulatos, Emilio & Sorensen, Robert, 1986. "What determines the elasticity of industry demand?," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 237-250, September.
  11. Catherine J. Morrison, 1990. "Market Power, Economic Profitability and Productivity Growth Measurement: An Integrated Structural Approach," NBER Working Papers 3355, National Bureau of Economic Research, Inc.
  12. Chou, Tein-Chen, 1986. "Concentration, Profitability and Trade in a Simultaneous Equation Analysis: The Case of Taiwan," Journal of Industrial Economics, Wiley Blackwell, vol. 34(4), pages 429-43, June.
  13. Esposito, Louis & Esposito, Frances Ferguson, 1971. "Foreign Competition and Domestic Industry Profitability," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 343-53, November.
  14. Ianchovichina, Elena & Binkley, James & Hertel, Thomas, 2000. "Procompetitive Effects of Foreign Competition on Domestic Markups," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 134-48, February.
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Cited by:
  1. Rigoberto A. López & Elena López & Carmen Liron-Espana, 2009. "When is concentration beneficial? Evidence from U.S. manufacturing," Alcamentos 0901, Universidad de Alcalá, Departamento de Estadística, Estructura y O.E.I..
  2. Marsh, John M. & Brester, Gary W., 2004. "Wholesale-Retail Marketing Margin Behavior in the Beef and Pork Industries," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(01), April.

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