Competition, markups, and the gains from international trade

Chris Edmond, Virgiliu Midrigan, Daniel Yi Xu

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)3183-3221
    Number of pages39
    JournalAmerican Economic Review
    Volume105
    Issue number10
    DOIs
    StatePublished - Oct 1 2015

    Fingerprint

    International trade
    Markups
    Markup
    Misallocation
    Productivity
    Quantitative model

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Competition, markups, and the gains from international trade. / Edmond, Chris; Midrigan, Virgiliu; Xu, Daniel Yi.

    In: American Economic Review, Vol. 105, No. 10, 01.10.2015, p. 3183-3221.

    Research output: Contribution to journalArticle

    Edmond, Chris ; Midrigan, Virgiliu ; Xu, Daniel Yi. / Competition, markups, and the gains from international trade. In: American Economic Review. 2015 ; Vol. 105, No. 10. pp. 3183-3221.
    @article{7020d3273a504632b06295a76ccae2ab,
    title = "Competition, markups, and the gains from international trade",
    abstract = "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.",
    author = "Chris Edmond and Virgiliu Midrigan and Xu, {Daniel Yi}",
    year = "2015",
    month = "10",
    day = "1",
    doi = "10.1257/aer.20120549",
    language = "English (US)",
    volume = "105",
    pages = "3183--3221",
    journal = "American Economic Review",
    issn = "0002-8282",
    publisher = "American Economic Association",
    number = "10",

    }

    TY - JOUR

    T1 - Competition, markups, and the gains from international trade

    AU - Edmond, Chris

    AU - Midrigan, Virgiliu

    AU - Xu, Daniel Yi

    PY - 2015/10/1

    Y1 - 2015/10/1

    N2 - 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.

    AB - 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.

    UR - http://www.scopus.com/inward/record.url?scp=84944104363&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=84944104363&partnerID=8YFLogxK

    U2 - 10.1257/aer.20120549

    DO - 10.1257/aer.20120549

    M3 - Article

    VL - 105

    SP - 3183

    EP - 3221

    JO - American Economic Review

    JF - American Economic Review

    SN - 0002-8282

    IS - 10

    ER -