International Trade and Corporate Market Power

34 Pages Posted: 12 Aug 2020

See all articles by Jesus Gonzalez-Garcia

Jesus Gonzalez-Garcia

International Monetary Fund (IMF)

Yuanchen Yang

International Monetary Fund

Date Written: July 1, 2020


This paper examines the effect of international trade on corporate market power in emerging market economies and developing countries, with a special focus on sub-Saharan Africa. The analysis is based on a large firm-level dataset, tariff data by sector and aggregate indicators of international trade for the period 2000-17. Greater trade liberalization and trade integration are associated with significant declines in market power, with the effect being more pronounced for firms in the manufacturing and ICT sectors, private sector firms, and firms with higher initial markups. Firms in sub-Saharan Africa tend to experience significantly lower markups after allowing greater trade integration. The effects of trade liberalization on market power materializes over time, and there are significant complementarities between trade reforms and real sector reforms.

Keywords: Real sector, Economic policy, Economic reforms, Patterns of trade, Bilateral trade, Commodity trade, competition, developing countries, emerging markets, international trade, market power, markups, trade liberalization., WP, institutional quality, markup, non-tariff trade barrier, tariff rate

JEL Classification: D40, F10, P11, F13, E01, F1, E2, G21

Suggested Citation

Gonzalez-Garcia, Jesus and Yang, Yuanchen, International Trade and Corporate Market Power (July 1, 2020). IMF Working Paper No. 20/131, Available at SSRN:

Jesus Gonzalez-Garcia (Contact Author)

International Monetary Fund (IMF) ( email )

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Yuanchen Yang

International Monetary Fund ( email )

United States

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