The Effect of International Trade on Mark-Ups Distribution
Complutense University of Madrid - Departamento de Fundamentos del Analisis Economico I
Diego Rodríguez Rodríguez
Universidad Complutense de Madrid (UCM) - Department of Applied Economics II
April 26, 2011
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).
Number of Pages in PDF File: 17
Keywords: markups, marginal costs, size, openness
JEL Classification: F12, L60, L13working papers series
Date posted: April 26, 2011 ; Last revised: May 2, 2011
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