The effect of international trade on mark-ups distribution

Thumbnail Image
Full text at PDC
Publication Date
Advisors (or tutors)
Journal Title
Journal ISSN
Volume Title
Universidad de Oviedo
Google Scholar
Research Projects
Organizational Units
Journal Issue
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 to identify individual mark-ups. The results point out that tougher competition associated to openness reduces 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 across industries 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).
Bernstein, J. and P. Mohnen (1991): "Price-Cost Margins, Exports and Productivity growth: with an Application to Canadian Industries", Canadian Journal of Economics, 24, 638-659. Bellone, F., Musso, P., Nesta, L. and F. Warzynski (2012): “Productivity, Trade and Endogenous Mark-ups: Testing some Micro-level Implications of the Melitz-Ottaviano Model”, mimeo. Chen, N., J. Imbs and A. Scott (2009): "The dynamics of trade and competition", Journal of International Economics, 77, 1, 50-62. De Loecker, J. and Warzynski, F., (2012): “Markups and Firm-Level ExportStatus”, American Economic Review, 102(6), pp. 2437-2471.Feenstra, R. and D. Weinstein (2010): “Globalization, Markups and the U.S. Price Level”, Working Paper 15479, NBER. Melitz, M.J. (2003): “The impact of trade on intra-industry reallocations and aggregate industry productivity”, Econometrica, 71, 6, 1695-1725. Melitz, M. J. and G.I.P. Ottaviano (2008): "Market Size, Trade, and Productivity", The Review of Economic Studies, 75, 295-316. Moreno, L. and D. Rodríguez (2010): “Export activity, persistence and mark-ups”, Applied Economics,42, 475-488. Ottaviano, G.I.P., T. Tabuchi and J.F.Thisse (2002): “Agglomeration and Trade Revisited”, International Economic Review, 43, 409-436. Roeger, W. (1995): “Can imperfect competition explain the difference between primal and dual productivity measures? Estimates for U.S. Manufacturing”, Journal of Political Economy, 103 (2), 316-330.