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International Competition and Industrial Performance: Allocative Efficiency, Productive Efficiency, and Turbulence

Statistics Canada Research Paper No. 108

31 Pages Posted: 12 Mar 1998  

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division

Richard E. Caves

Harvard University & Statistics Canada; Government of Canada - Analytical Studies Branch

Date Written: October 1997

Abstract

Trade exerts generally favorable effects on the performance of domestic manufacturing industries in the dimensions of allocative and productive efficiency. We review theory and recent evidence on these linkages and also explore a third effect on the turbulence of competitive conditions and the turnover of business units. Calculations using primary census records for Canada over 1973-1992 indicate, with time and industry effect controlled, market-share turnover, entry, exit, and mergers all increase with trade exposure. The effect is tied to market structures of differentiated products, but broad international disturbances (North American Free Trade Area) also have significant effects. The normative significance of turbulence is mixed but has important positive components.

JEL Classification: F19, L10, L20

Suggested Citation

Baldwin, John R. and Caves, Richard E., International Competition and Industrial Performance: Allocative Efficiency, Productive Efficiency, and Turbulence (October 1997). Statistics Canada Research Paper No. 108. Available at SSRN: https://ssrn.com/abstract=54942 or http://dx.doi.org/10.2139/ssrn.54942

John Baldwin (Contact Author)

Statistics Canada - Microeconomic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada
613-951-8588 (Phone)
613-951-5403 (Fax)

Richard Caves

Government of Canada - Analytical Studies Branch

120 Parkdale Avenue
24th Floor, R.H. Coats Building
Ottawa, Ontario K1A 0T6
Canada

Harvard University & Statistics Canada ( email )

Littauer Center
Room 210
Cambridge, MA 02138
United States
617-495-2127 (Phone)

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