Competition, markups, and the gains from international trade

Published

Journal Article

We study the procompetitive gains from international trade in a quantitative model with endogenously variable markups. We find that trade can significantly reduce markup distortions if two conditions are satisfied: (i ) there is extensive misallocation, and (ii ) opening to trade exposes hitherto dominant producers to greater competitive pressure. We measure the extent to which these two conditions are satisfied in Taiwanese producer-level data. Versions of our model consistent with the Taiwanese data predict that opening up to trade strongly increases competition and reduces markup distortions by up to one-half, thus significantly reducing productivity losses due to misallocation.

Full Text

Duke Authors

Cited Authors

  • Edmond, C; Midrigan, V; Xu, DY

Published Date

  • January 1, 2015

Published In

Volume / Issue

  • 105 / 10

Start / End Page

  • 3183 - 3221

International Standard Serial Number (ISSN)

  • 0002-8282

Digital Object Identifier (DOI)

  • 10.1257/aer.20120549

Citation Source

  • Scopus