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Intra-Industry Adjustment to Import Competition: Theory and Application to the German Clothing Industry

  • Horst Raff
  • Joachim Wagner

This paper uses an oligopoly model with heterogeneous firms to examine how an industry adjusts to rising import competition. The model predicts that in the short run the least efficient firms in the industry become inactive, surviving firms face a fall in output, mark-ups and profits, and the average productivity of survivors increases. These pro-competitive effects of import penetration on the domestic industry disappear in the long run. The predictions for the short run are confirmed in an empirical study of the German clothing industry

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File URL: https://www.ifw-members.ifw-kiel.de/publications/intra-industry-adjustment-to-import-competition-theory-and-application-to-the-german-clothing-industry/kwp_1557
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1557.

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Length: 22 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:kie:kieliw:1557
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  15. Francois, Joseph & Woerz, Julia, 2009. "Non-linear panel estimation of import quotas: The evolution of quota premiums under the ATC," Journal of International Economics, Elsevier, vol. 78(2), pages 181-191, July.
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  17. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
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