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Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence

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Author Info
Erkan Erdem
James Tybout
Abstract

Firm- and plant-level empirical studies typically find that trade liberalization squeezes price-cost margins among import-competing firms, that this heightened competitive pressure induces productivity gains among these same firms, and that further efficiency gains come from market share reallocations. Using a computable industrial evolution model to simulate the dynamic effects of import competition, we demonstrate what types of managerial behavior, long-term transition paths and welfare effects are consistent with this set of stylized facts.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9947.

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Date of creation: Sep 2003
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Handle: RePEc:nbr:nberwo:9947

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F1 - International Economics - - Trade
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krishna, Pravin & Mitra, Devashish, 1998. "Trade liberalization, market discipline and productivity growth: new evidence from India," Journal of Development Economics, Elsevier, vol. 56(2), pages 447-462, August. [Downloadable!] (restricted)
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  2. Francesco Daveri & Paolo Manasse & Danila Serra, . "The Twin Effects of Globalization," Working Papers 240, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  3. Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April. [Downloadable!] (restricted)
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  5. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring. [Downloadable!] (restricted)
  6. Levinsohn, James, 1999. "Employment responses to international liberalization in Chile," Journal of International Economics, Elsevier, vol. 47(2), pages 321-344, April. [Downloadable!] (restricted)
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  16. de Melo, Jaime & Urata, Shujiro, 1986. "The influence of increased foreign competition on industrial concentration and profitability," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 287-304, September. [Downloadable!] (restricted)
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  18. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
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  20. Curtis Eaton, B. & Lipsey, Richard G., 1989. "Product differentiation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 12, pages 723-768 Elsevier. [Downloadable!] (restricted)
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  22. Ariel Pakes & Paul McGuire, 1994. "Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 555-589, Winter. [Downloadable!] (restricted)
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  23. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 245-76, January.
  24. Liu, Lili, 1993. "Entry-exit, learning, and productivity change Evidence from Chile," Journal of Development Economics, Elsevier, vol. 42(2), pages 217-242, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Aldaba, Rafaelita Mercado, 2005. "The Impact of Market Reforms on Competition, Structure and Performance of the Philippine Economy," Discussion Papers DP 2005-24, Philippine Institute for Development Studies. [Downloadable!]
  2. Alberto Amurgo-Pacheco, Martha Denisse Pierola, 2007. "Patterns of export diversification in developing countries: intensive and extensive margins," HEI Working Papers heiwp20-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007. [Downloadable!]
    Other versions:
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