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Endogenous Markups, International Trade, and the Product Mix

Author

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  • Carlo Altomonte

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  • Alessandro Barattieri

    ()

Abstract

We investigate the effects of import penetration on the estimated price–cost margins of more than 28,000 firms operating in the Italian manufacturing sector. In the period considered (1998–2003), we find on average broad evidence of pro-competitive gains from trade. However, when performing the same analysis at a more detailed industry level, we find substantial heterogeneity in the responses: in some industries the increased exposure to international trade is associated with higher, rather than lower, markups, while in others the relationship is not significant. In particular, the industries in which we find a positive impact of import penetration on markups exhibit, on average, a larger variation in the composition of their product-mix. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Carlo Altomonte & Alessandro Barattieri, 2015. "Endogenous Markups, International Trade, and the Product Mix," Journal of Industry, Competition and Trade, Springer, vol. 15(3), pages 205-221, September.
  • Handle: RePEc:kap:jincot:v:15:y:2015:i:3:p:205-221
    DOI: 10.1007/s10842-014-0181-5
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    References listed on IDEAS

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    1. Holger Gæ””g & Frederic Warzynski, 2003. "Price cost margins and exporting behaviour: Evidence from firm level data," LICOS Discussion Papers 13303, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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    8. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
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    11. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2005. "The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 124-134, February.
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    16. repec:pri:cepsud:231deloecker is not listed on IDEAS
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    Cited by:

    1. Lourdes Moreno & Diego Rodríguez, 2011. "Markups, Bargaining Power and Offshoring: An Empirical Assessment-super-1," The World Economy, Wiley Blackwell, vol. 34(9), pages 1593-1627, September.
    2. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D’Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo Sc, 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.
    3. Carlo Altomonte & Marcella Nicolini & Armando Rungi & Laura Ogliari, 2010. "Assessing the Competitive Behaviour of Firms in the Single Market: A Micro-based Approach," European Economy - Economic Papers 2008 - 2015 409, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    Price cost margins; Trade openness; Product mix; F15; L11;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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