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Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms

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  • Del Gatto, Massimo
  • Ottaviano, Gianmarco Ireo Paolo
  • Pagnini, Marcello

Abstract

We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6336.

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Date of creation: Jun 2007
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Handle: RePEc:cpr:ceprdp:6336

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Keywords: Cost dispersion; firm selection; firm-level data; openness to trade; total factor productivity;

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