Does Antidumping Protection Raise Market Power? Evidence from Firm Level Data
Catholic University of Leuven (KUL) - LICOS - Centrum voor Transitie-economie; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
Catholic University of Leuven (KUL), LICOS & CEPR
CEPR Discussion Paper No. 3571
This paper empirically tests the effects of Anti-Dumping (AD) protection on the price-cost margin of firms. To this end, we use a rich panel data set of 1,666 EU producers that were involved in AD cases initiated in 1996. Our findings indicate that price-cost margins in most cases significantly increase in the period of protection compared to a period before protection. In industries where competition is very tough before protection, we fail to find an increase in price-cost margins, while in industries with positive mark-ups before protection, trade policy raises market power between 3% points and 15% points, depending on the sector. Our results are robust to alternative specifications and estimation techniques. Our findings are also consistent with recent theoretical models that deal with the economic effects of firm behavior in response to AD protection.
Number of Pages in PDF File: 41
Keywords: market power, price-cost markups, antidumping cases, European producers
JEL Classification: F13, L13, L41
Date posted: November 1, 2002
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