Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms

43 Pages Posted: 17 Oct 2007

See all articles by Massimo Del Gatto

Massimo Del Gatto

CRENOS - Centre for North South Economic Research; 'Gabriele d'Annunzio' University of Chieti-Pescara - Faculty of Economics

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Marcello Pagnini

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: June 2007

Abstract

We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.

Keywords: Cost dispersion, openness to trade, firm-level data, firm selection, total factor productivity

JEL Classification: F12, F15, R13

Suggested Citation

Del Gatto, Massimo and Ottaviano, Gianmarco I.P. and Pagnini, Marcello, Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms (June 2007). CEPR Discussion Paper No. 6336, Available at SSRN: https://ssrn.com/abstract=1022271 or http://dx.doi.org/10.2139/ssrn.1022271

Massimo Del Gatto

CRENOS - Centre for North South Economic Research ( email )

Cagliari
Italy

'Gabriele d'Annunzio' University of Chieti-Pescara - Faculty of Economics ( email )

Faculty of Economics - Department of Economics
Viale Pindaro, 42
Pescara, 65127
Italy

Gianmarco I.P. Ottaviano (Contact Author)

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

Marcello Pagnini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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