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Testing the imports-as-market-discipline hypothesis

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  • Levinsohn, James

Abstract

It has long been believed that international competition forces domestic firms to behave more competitively. I term this the imports-as--market-discipline hypothesis. I construct a simple static oligopoly model and estimate the model using panel data from Turkish manufacturing firms. The data span the course of a dramatic trade liberalization. Looking for changes in price-marginal cost markups as trade policy shifts, I test the imports-as-market discipline hypothesis. In all five industries to which the hypothesis is relevant, markups change in the direction predicted by the theory. These changes are statistically significant in all but one of the five industries.
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Suggested Citation

  • Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
  • Handle: RePEc:eee:inecon:v:35:y:1993:i:1-2:p:1-22
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    References listed on IDEAS

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    1. Dani Rodrik, 1990. "Premature Liberalization, Incomplete Stabilization: the Ozal Decade in Turkey," NBER Working Papers 3300, National Bureau of Economic Research, Inc.
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    7. Roberts, Mark J., 1984. "Testing oligopolistic behavior," International Journal of Industrial Organization, Elsevier, vol. 2(4), pages 367-383, December.
    8. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    9. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494, Elsevier.
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