International Trade and Retail Market Performance and Structure: Theory and Empirical Evidence
65 Pages Posted: 20 Aug 2018 Last revised: 21 Feb 2019
Date Written: 2018
Based on a theoretical model featuring heterogeneous retailers that may source globally and operate as chains, we derive a number of hypotheses that link trade integration to retail firm performance and to the structure of retail markets. We empirically test these predictions using Danish microdata for the period 1999 to 2008. We find that importing retailers are larger, more profitable, and have a higher propensity to have multiple shops than domestically sourcing firms. While this is partly due to self-selection, we also present evidence for improved performance caused by firms' importing activities. Moreover, we find that retail imports are associated with a higher exit probability of small retailers and greater local retail market concentration. Overall, we obtain support for the model's predictions and argue that the observed adjustments may imply additional gains from trade absent from models lacking a distribution sector.
Keywords: international trade, consumer goods, retailing, retail chains
JEL Classification: F12, L11
Suggested Citation: Suggested Citation