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Globalization, Markups, and US Welfare

Listed author(s):
  • Robert C. Feenstra
  • David E. Weinstein

This paper estimates the impact of globalization on markups, and the effect of changing markups on US welfare, in a monopolistic competition model. We work with symmetric translog preferences, which allow for endogenous markups and firm entry and exit, thereby changing product variety. We find that between 1992 and 2005, US import shares rose and US firms exited, leading to an implied fall in markups, while variety went up because of imports. US welfare rose by nearly 1 percent as a result of these changes, with product variety contributing one-half of that total and declining markups the other half.

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File URL: http://dx.doi.org/10.1086/692695
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File URL: http://dx.doi.org/10.1086/692695
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 125 (2017)
Issue (Month): 4 ()
Pages: 1040-1074

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Handle: RePEc:ucp:jpolec:doi:10.1086/692695
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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