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The effect of international trade on markups distribution

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  • Diego Rodriguez
  • Lourdes Moreno

Abstract

This paper presents empirical evidence about the relationship between market openness and markup distribution of manufacturing firms. The results point out that tougher competition associated to openness reduces marginal costs and prices, while it increases the average firm size. However, the evidence about the effect on average markups and the dispersion of performance variables across industries is weaker. These results partially support the theoretical predictions by Melitz and Ottaviano (2008)

Suggested Citation

  • Diego Rodriguez & Lourdes Moreno, 2013. "The effect of international trade on markups distribution," Economics and Business Letters, Oviedo University Press, vol. 2(1), pages 33-41.
    • Handle: RePEc:ove:journl:aid:9820
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/9820
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    References listed on IDEAS

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    1. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    2. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2009. "The dynamics of trade and competition," Journal of International Economics, Elsevier, vol. 77(1), pages 50-62, February.
    3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    4. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, vol. 102(6), pages 2437-2471, October.
    5. Jeffrey I. Bernstein & Pierre Mohnen, 1991. "Price-Cost Margins, Exports and Productivity Growth: With an Application to Canadian Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 638-659, August.
    6. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity (DOI:10.111/j.1467-937x.2007.00463.x)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 985-985.
    7. Lourdes Moreno Martin & Diego Rodriguez Rodriguez, 2010. "Export activity, persistence and mark-ups," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 475-488.
    8. Lourdes Moreno & Diego Rodríguez, 2004. "Domestic and Foreign Price/Marginal‐cost Margins: an Application to Spanish Manufacturing Firms," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 60-80, February.
    9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    10. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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