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Trade Liberalization and Industry Dynamics: A Difference in Difference Approach


Roberto Alvarez


University of Chile - Department of Economics

Ricardo A. Lopez


Brandeis International Business School

April 30, 2008

CAEPR Working Paper No. 2008-009

Abstract:     
Recent models of trade with firm heterogeneity predict that opening to trade reduces the number of firms, increases the average size of firms, and decreases firms' markups. This paper uses a large dataset for 28 manufacturing industries and 46 countries to test these predictions. The econometric analysis based on the treatment effects literature shows that on average, trade liberalizations do not decrease the number of firms nor increase the average size of firms. Markups appear to decrease during the three years after the liberalization. We also find that the number of firms and the average size of firms increase in comparative advantage industries.

Number of Pages in PDF File: 51

Keywords: Trade Liberalization, Industry Dynamics, Treatment Effects

JEL Classification: F10, L11

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Date posted: April 30, 2008  

Suggested Citation

Alvarez, Roberto and Lopez, Ricardo A., Trade Liberalization and Industry Dynamics: A Difference in Difference Approach (April 30, 2008). CAEPR Working Paper No. 2008-009. Available at SSRN: http://ssrn.com/abstract=1127251 or http://dx.doi.org/10.2139/ssrn.1127251

Contact Information

Roberto Alvarez
University of Chile - Department of Economics ( email )
Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile
Ricardo A. López (Contact Author)
Brandeis International Business School
Mailstop 32
Waltham, MA 02454-9110
United States
HOME PAGE: http://people.brandeis.edu/~rlopez/
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