Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence
37 Pages Posted: 9 Sep 2003 Last revised: 7 Sep 2022
Date Written: September 2003
Firm- and plant-level empirical studies typically find that trade liberalization squeezes price-cost margins among import-competing firms, that this heightened competitive pressure induces productivity gains among these same firms, and that further efficiency gains come from market share reallocations. Using a computable industrial evolution model to simulate the dynamic effects of import competition, we demonstrate what types of managerial behavior, long-term transition paths and welfare effects are consistent with this set of stylized facts.
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