Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration
How firms react to a given shock may depend on the degree to which rivals are present and on whether potentially viable entrants to that market exist. The authors try to measure these effects internationally by examining the price behavior of the U...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2001/01/1000458/market-presence-contestability-terms-of-trade-effects-regional-integration http://hdl.handle.net/10986/15740 |
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okr-10986-157402021-04-23T14:03:19Z Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration Schiff, Maurice Chang, Won ABSOLUTE VALUE BERTRAND COMPETITION BLOC FORMATION COMPETITIVENESS CONDITION OF ENTRY CONSUMER PRICES CONTESTABILITY CONTESTABLE MARKETS CURRENCY CUSTOMS CUSTOMS UNION DIFFERENTIATED PRODUCTS ECONOMIC POLICY ECONOMIES OF SCALE EMPIRICAL ANALYSIS ENDOGENOUS TARIFF FORMATION EXCHANGE RATE EXCHANGE RATES EXPORT MARKETS EXPORT PRICE EXPORT PRICES EXPORTERS EXPORTS EXTERNAL TARIFF EXTERNAL TARIFFS EXTERNAL TRADE EXTERNAL TRADE BARRIERS FOREIGN FIRMS FREE TRADE HOME MARKET IMPERFECT COMPETITION IMPORT PRICES IMPORTS INPUT PRICES INTERNAL FREE TRADE INTERNAL LIBERALIZATION INTERNATIONAL ECONOMICS INTERNATIONAL MARKETS LOCAL CURRENCY MARGINAL COST MARGINAL COSTS MARKET ACCESS MARKET BEHAVIOR MARKET PRESENCE MARKET SHARE MARKET SHARES MARKET STRUCTURE MEMBER COUNTRY MFN TARIFFS MOST-FAVORED- NATION MOST-FAVORED-NATION NON- MEMBER COUNTRIES NON-MEMBER COUNTRIES OLIGOPOLY POLICY REFORMS PREFERENTIAL LIBERALIZATION PREFERENTIAL TARIFF PREFERENTIAL TARIFFS PREFERENTIAL TRADE PREFERENTIAL TRADE LIBERALIZATION PREFERENTIAL TRADE POLICY PRICE EFFECT PRICE EFFECTS PRICE INDEX PRO-COMPETITIVE EFFECTS PRODUCERS PRODUCT CATEGORIES REDUCING PRICES REGIONAL AGREEMENT REGIONAL BLOCS REGIONAL INTEGRATION REGIONAL INTEGRATION AGREEMENTS REGIONALISM RETAIL SALES SUPPLIERS TARIFF DATA TARIFF RATE TARIFF RATES TARIFF REDUCTION TARIFF STRUCTURE TERMS OF TRADE TRADE BLOC TRADE CREATION TRADE DATA TRADE EFFECTS TRADE GAINS TRADE LIBERALIZATION TRADE PATTERN TRADE POLICIES TRADE POLICY TRADE VOLUME TRADING PARTNER TRADING PARTNERS UNILATERAL REFORMS WORLD MARKET TERMS OF TRADE CONTESTABILITY TRADE LIBERALIZATION MOST FAVOURED NATION CLAUSE TARIFFS EXCHANGE RATES REGIONAL TRADE AGREEMENTS How firms react to a given shock may depend on the degree to which rivals are present and on whether potentially viable entrants to that market exist. The authors try to measure these effects internationally by examining the price behavior of the United States in Brazil's market when MERCOSUR trade liberalization and most-favored-nation (MFN) trade liberalization take place. Using detailed panel data on trade and tariff rates, they find that both the market presence of a preferred supplier and expected entry lessen the U.S. price reaction to MFN trade liberalization and increase the U.S. price reaction to preferential trade liberalization. Argentina's presence in Brazil's market results in a smaller U.S. price response to Brazil's MFN tariff change and in a larger response to a preferential tariff change. More surprisingly, the quantitative effects of market presence and expected entry (contestability) are not significantly different from each other. Contestability plays no significant role when Argentina's is absent from Brazil's market, contestability lessens the U.S. response to changes in the MFN tariff and increases it in response to changes in the preferential tariff. It follows from these results that presence in, as well as threat of entry into, partners' markets implies lower optimal external tariffs and suggests that regional agreements can have pro-competitive effects in the presence of contestability. The authors also examine the hypothesis of "symmetry" between the effect of tariffs and that of exchange rates. 2013-09-09T20:46:06Z 2013-09-09T20:46:06Z 2001-01 http://documents.worldbank.org/curated/en/2001/01/1000458/market-presence-contestability-terms-of-trade-effects-regional-integration http://hdl.handle.net/10986/15740 English en_US Policy Research Working Paper;No. 2532 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ABSOLUTE VALUE BERTRAND COMPETITION BLOC FORMATION COMPETITIVENESS CONDITION OF ENTRY CONSUMER PRICES CONTESTABILITY CONTESTABLE MARKETS CURRENCY CUSTOMS CUSTOMS UNION DIFFERENTIATED PRODUCTS ECONOMIC POLICY ECONOMIES OF SCALE EMPIRICAL ANALYSIS ENDOGENOUS TARIFF FORMATION EXCHANGE RATE EXCHANGE RATES EXPORT MARKETS EXPORT PRICE EXPORT PRICES EXPORTERS EXPORTS EXTERNAL TARIFF EXTERNAL TARIFFS EXTERNAL TRADE EXTERNAL TRADE BARRIERS FOREIGN FIRMS FREE TRADE HOME MARKET IMPERFECT COMPETITION IMPORT PRICES IMPORTS INPUT PRICES INTERNAL FREE TRADE INTERNAL LIBERALIZATION INTERNATIONAL ECONOMICS INTERNATIONAL MARKETS LOCAL CURRENCY MARGINAL COST MARGINAL COSTS MARKET ACCESS MARKET BEHAVIOR MARKET PRESENCE MARKET SHARE MARKET SHARES MARKET STRUCTURE MEMBER COUNTRY MFN TARIFFS MOST-FAVORED- NATION MOST-FAVORED-NATION NON- MEMBER COUNTRIES NON-MEMBER COUNTRIES OLIGOPOLY POLICY REFORMS PREFERENTIAL LIBERALIZATION PREFERENTIAL TARIFF PREFERENTIAL TARIFFS PREFERENTIAL TRADE PREFERENTIAL TRADE LIBERALIZATION PREFERENTIAL TRADE POLICY PRICE EFFECT PRICE EFFECTS PRICE INDEX PRO-COMPETITIVE EFFECTS PRODUCERS PRODUCT CATEGORIES REDUCING PRICES REGIONAL AGREEMENT REGIONAL BLOCS REGIONAL INTEGRATION REGIONAL INTEGRATION AGREEMENTS REGIONALISM RETAIL SALES SUPPLIERS TARIFF DATA TARIFF RATE TARIFF RATES TARIFF REDUCTION TARIFF STRUCTURE TERMS OF TRADE TRADE BLOC TRADE CREATION TRADE DATA TRADE EFFECTS TRADE GAINS TRADE LIBERALIZATION TRADE PATTERN TRADE POLICIES TRADE POLICY TRADE VOLUME TRADING PARTNER TRADING PARTNERS UNILATERAL REFORMS WORLD MARKET TERMS OF TRADE CONTESTABILITY TRADE LIBERALIZATION MOST FAVOURED NATION CLAUSE TARIFFS EXCHANGE RATES REGIONAL TRADE AGREEMENTS |
| spellingShingle |
ABSOLUTE VALUE BERTRAND COMPETITION BLOC FORMATION COMPETITIVENESS CONDITION OF ENTRY CONSUMER PRICES CONTESTABILITY CONTESTABLE MARKETS CURRENCY CUSTOMS CUSTOMS UNION DIFFERENTIATED PRODUCTS ECONOMIC POLICY ECONOMIES OF SCALE EMPIRICAL ANALYSIS ENDOGENOUS TARIFF FORMATION EXCHANGE RATE EXCHANGE RATES EXPORT MARKETS EXPORT PRICE EXPORT PRICES EXPORTERS EXPORTS EXTERNAL TARIFF EXTERNAL TARIFFS EXTERNAL TRADE EXTERNAL TRADE BARRIERS FOREIGN FIRMS FREE TRADE HOME MARKET IMPERFECT COMPETITION IMPORT PRICES IMPORTS INPUT PRICES INTERNAL FREE TRADE INTERNAL LIBERALIZATION INTERNATIONAL ECONOMICS INTERNATIONAL MARKETS LOCAL CURRENCY MARGINAL COST MARGINAL COSTS MARKET ACCESS MARKET BEHAVIOR MARKET PRESENCE MARKET SHARE MARKET SHARES MARKET STRUCTURE MEMBER COUNTRY MFN TARIFFS MOST-FAVORED- NATION MOST-FAVORED-NATION NON- MEMBER COUNTRIES NON-MEMBER COUNTRIES OLIGOPOLY POLICY REFORMS PREFERENTIAL LIBERALIZATION PREFERENTIAL TARIFF PREFERENTIAL TARIFFS PREFERENTIAL TRADE PREFERENTIAL TRADE LIBERALIZATION PREFERENTIAL TRADE POLICY PRICE EFFECT PRICE EFFECTS PRICE INDEX PRO-COMPETITIVE EFFECTS PRODUCERS PRODUCT CATEGORIES REDUCING PRICES REGIONAL AGREEMENT REGIONAL BLOCS REGIONAL INTEGRATION REGIONAL INTEGRATION AGREEMENTS REGIONALISM RETAIL SALES SUPPLIERS TARIFF DATA TARIFF RATE TARIFF RATES TARIFF REDUCTION TARIFF STRUCTURE TERMS OF TRADE TRADE BLOC TRADE CREATION TRADE DATA TRADE EFFECTS TRADE GAINS TRADE LIBERALIZATION TRADE PATTERN TRADE POLICIES TRADE POLICY TRADE VOLUME TRADING PARTNER TRADING PARTNERS UNILATERAL REFORMS WORLD MARKET TERMS OF TRADE CONTESTABILITY TRADE LIBERALIZATION MOST FAVOURED NATION CLAUSE TARIFFS EXCHANGE RATES REGIONAL TRADE AGREEMENTS Schiff, Maurice Chang, Won Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| geographic_facet |
Latin America & Caribbean |
| relation |
Policy Research Working Paper;No. 2532 |
| description |
How firms react to a given shock may
depend on the degree to which rivals are present and on
whether potentially viable entrants to that market exist.
The authors try to measure these effects internationally by
examining the price behavior of the United States in
Brazil's market when MERCOSUR trade liberalization and
most-favored-nation (MFN) trade liberalization take place.
Using detailed panel data on trade and tariff rates, they
find that both the market presence of a preferred supplier
and expected entry lessen the U.S. price reaction to MFN
trade liberalization and increase the U.S. price reaction to
preferential trade liberalization. Argentina's presence
in Brazil's market results in a smaller U.S. price
response to Brazil's MFN tariff change and in a larger
response to a preferential tariff change. More surprisingly,
the quantitative effects of market presence and expected
entry (contestability) are not significantly different from
each other. Contestability plays no significant role when
Argentina's is absent from Brazil's market,
contestability lessens the U.S. response to changes in the
MFN tariff and increases it in response to changes in the
preferential tariff. It follows from these results that
presence in, as well as threat of entry into, partners'
markets implies lower optimal external tariffs and suggests
that regional agreements can have pro-competitive effects in
the presence of contestability. The authors also examine the
hypothesis of "symmetry" between the effect of
tariffs and that of exchange rates. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Schiff, Maurice Chang, Won |
| author_facet |
Schiff, Maurice Chang, Won |
| author_sort |
Schiff, Maurice |
| title |
Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| title_short |
Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| title_full |
Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| title_fullStr |
Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| title_full_unstemmed |
Market Presence, Contestability, and the Terms-of-Trade Effects of Regional Integration |
| title_sort |
market presence, contestability, and the terms-of-trade effects of regional integration |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2001/01/1000458/market-presence-contestability-terms-of-trade-effects-regional-integration http://hdl.handle.net/10986/15740 |
| _version_ |
1764429589336031232 |