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Import competition, productivity and multi-product firms

Author

Listed:
  • Emmanuel Dhyne

    () (NBB, UMons)

  • Amil Petrin

    (U. Minnesota)

  • Valerie Smeets

    (Aarhus U.)

  • Frederic Warzynski

    () (Aarhus U.)

Abstract

Using detailed firm-product level quarterly data, we develop an estimation framework of a Multi-Product Production Function (MPPF) and analyse firm-product level TFP estimations at various levels (industries, products). After documenting our estimation results, we relate productivity estimates with import competition, using firm and product level measures of import competition. We find that if productivity at the firm level tends to positively react to increased import competition, the multi-product firms response varies according to the relative importance of the product that faces stronger import competition in the firm’s product portfolio. When import competition associated to the main product of a firm increases, the firm tend to increase its efficiency in producing that core product, in which it has a productivity advantage. However, when the degree of foreign competition increases for non core products of a firm, it tends to lower its efficiency in producing those goods.

Suggested Citation

  • Emmanuel Dhyne & Amil Petrin & Valerie Smeets & Frederic Warzynski, 2014. "Import competition, productivity and multi-product firms," Working Paper Research 268, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201410-268
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp268en.pdf
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    References listed on IDEAS

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    4. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, September.
    5. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
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    7. Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
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    12. Thomas J. Holmes & James A. Schmitz, 2010. "Competition and Productivity: A Review of Evidence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 619-642, September.
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    Cited by:

    1. Emanuele Forlani & Ralf Martin & Giordano Mion & Mirabelle Muûls, 2016. "Unraveling firms: Demand, productivity and markups heterogeneity," Working Paper Research 293, National Bank of Belgium.
    2. Emmanuel Dhyne & Catherine Fuss, 2014. "Main lessons of the NBB’s 2014 conference “Total factor productivity : measurement, determinants and effects”," Economic Review, National Bank of Belgium, issue iii, pages 63-76, December.
    3. repec:nbb:ecrart:y:2014:m:december:i:iii:p:69-82 is not listed on IDEAS

    More about this item

    Keywords

    multi-product production function; productivity; import competition;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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