Imports as Product and Labor Market Discipline
27 Pages Posted: 24 Jul 2006
Date Written: June 2006
This paper tests the pro-competitive effect of trade in the product and labor markets of UK manufacturing sectors between 1988 and 2003 using a two-stage estimation procedure. In the first stage, we use data on 9820 firms from twenty manufacturing sectors to simultaneously estimate mark-up and workers' bargaining power parameters according to sector, firm size and period. We find a significant drop in both the mark-up and the workers' bargaining power in the mid-nineties. In the second stage, we relate our parameters of interest to trade variables. Our results show that imports from developed countries have significantly contributed to the decrease in both mark-ups and workers' bargaining power.
Keywords: workers' bargaining power, mark-ups, pro-competitive effect
JEL Classification: C23, F16, J51, L13
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