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Competition and Imports in the European Market

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  • Jacquemin, Alexis
  • Sapir, André

Abstract

Theoretical and empirical research suggests that import competition within European markets imposes a major constraint on domestic firms's price-cost margins. The programme for the completion of the European Community's (EC) internal market by 1992 is largely based on the effects expected from a reinforcement of such a constraint. But imports from the rest of the world could also exercise an important trade discipline on European market performance. In fact there are various arguments suggesting that the disciplinary effect of extra-EC imports could be stronger than that of intra-EC imports. The paper develops an empirical model to measure the relative strength of import discipline on price-cost margins in European industries. We find that both potential and actual competition induced by imports are effective in narrowing such margins. Furthermore, trade discipline varies not only according to various features of industry but also according to the origin of imports: only extra-EC imports were found to exercise a significant impact on price-cost margins.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 474.

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Date of creation: Nov 1990
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Handle: RePEc:cpr:ceprdp:474

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Keywords: Commercial; European Integration; Imperfect Competition; Import Competition; Market Structure;

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Citations

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Cited by:
  1. Yongcheol Shin & Laura Serlenga, 2004. "Gravity Models of the Intra-EU Trade: Application of the Hausman-Taylor Estimation in Heterogeneous Panels with Common Time-specific Factors," Econometric Society 2004 Far Eastern Meetings 671, Econometric Society.
  2. Georges Siotis, 2000. "Market Power, Total Factor Productivity Growth, and Structural Change. An Illustration for Spain, 1983-1996," Banco de Espa�a Working Papers 0001, Banco de Espa�a.
  3. Co, Catherine Y., 2001. "Trade, foreign direct investment and industry performance," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 163-183, January.
  4. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 1999. "The Dynamics of Industrial Markups in Two Small Open Economies: Does National Competition Policy Matter ?," Center for Economic Studies - Discussion papers ces9914, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  5. Nunnenkamp, Peter, 1994. "Nach der Uruguay-Runde: Triebkräfte und Sprengsätze für die Weltwirtschaft," Open Access Publications from Kiel Institute for the World Economy 1629, Kiel Institute for the World Economy (IfW).
  6. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 192, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Gaetan Nicodeme & Jacques-Bernard Sauner-Leroy, 2004. "Product market reforms and productivity: a review of the theoretical and empirical literature on the transmission channels," European Economy - Economic Papers 218, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  8. Castillo, Leopoldo Laborda & Salem, Daniel Sotelsek & Guasch, Jose Luis, 2012. "Innovative and absorptive capacity of international knowledge : an empirical analysis of productivity sources in Latin American countries," Policy Research Working Paper Series 5931, The World Bank.
  9. Nunnenkamp, Peter, 1993. "Handelspolitischer Kompensationsbedarf aufgrund des EG-Binnenmarktprogramms," Open Access Publications from Kiel Institute for the World Economy 1569, Kiel Institute for the World Economy (IfW).
  10. Lundin, Nan Nan, 2004. "Import Competition, Product Differentiation and Mark-Ups - Microeconomic evidence from Swedish manufacturing in the 1990s," Working Paper Series 195, Trade Union Institute for Economic Research.
  11. Langhammer, Rolf J. & Schweickert, Rainer, 2006. "EU integration and its implications for Asian economies: What we do and do not know," Journal of Asian Economics, Elsevier, vol. 17(3), pages 395-416, June.
  12. Rolf J. Langhammer & Rainer Schweickert, 2006. "EU Integration and its Implications for Asian Economies – What we Know and What Not," Kiel Working Papers 1264, Kiel Institute for the World Economy.
  13. Nunnenkamp, Peter, 1993. "The world trading system at the crossroads : multilateral trade negotiations in the era of regionalism," Kiel Discussion Papers 204, Kiel Institute for the World Economy (IfW).
  14. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
  15. Lundin, Nan Nan, 2003. "Has Import Disciplined Swedish Manufacturing Firms in the 1990s?," Working Paper Series 192, Trade Union Institute for Economic Research.

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