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The impact of trade liberalization on firms’ product and labor market power

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  • Sabien Dobbelaere
  • Quint Wiersma

Abstract

This paper examines the impact of trade liberalization on firms’ product and labor market power. We estimate the prevalence and intensity of price-cost markups and either wage markups or wage markdowns, taking the dependence between these model-consistent measures of product and labor market power into account. Exploiting reductions in tariffs upon China’s World Trade Organization accession, we find that trade liberalization has not switched firms away from exercising product and labor market power. Reducing input tariffs has widened price-cost markups, narrowed wage markdowns, and widened wage markups at the firm level. We reveal heterogeneous trade liberalization effects on the intensity of firms’ product and labor market power.

Suggested Citation

  • Sabien Dobbelaere & Quint Wiersma, 2025. "The impact of trade liberalization on firms’ product and labor market power," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 34(1), pages 210-233.
    • Handle: RePEc:oup:indcch:v:34:y:2025:i:1:p:210-233.
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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