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The effect of international trade on mark-ups distribution

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Abstract

This paper presents empirical evidence about the relationship between market openness and markup distribution of manufacturing firms. The empirical analysis uses a panel data set of Spanish firms in the period 1990-2005, with a structural approach that lets us to identify individual mark-ups. The results point out that tougher competition associated to openness reduces the average of 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 is weaker. These results partially support the theoretical predictions by the recent literature on efficiency heterogeneity and international trade and, in particular, Melitz and Ottaviano (2008).

Suggested Citation

  • Moreno, L & Rodríguez, D, 2009. "The effect of international trade on mark-ups distribution," MPRA Paper 22652, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22652
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
    4. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    5. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity (DOI:10.111/j.1467-937x.2007.00463.x)," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 985-985.
    6. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
    7. 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.
    8. 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.
    9. 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.
    10. Lourdes Moreno Martin & Diego Rodriguez Rodriguez, 2010. "Export activity, persistence and mark-ups," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 475-488.
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    More about this item

    Keywords

    markups; marginal costs; size; openness;

    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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