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Openess to trade and industry cost dispersion: Evidence from a panel of Italian firms

  • Massimo Del Gatto


    (University of Cagliari)

  • Gianmarco I.P. Ottaviano


    (University of Bologna)

  • Marcello Pagnini


    (Bank of Italy)

We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 635.

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Date of creation: Jun 2007
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Handle: RePEc:bdi:wptemi:td_635_07
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