Trade Policy and Market Power : Firm-Level Evidence
This paper identifies the effect of trade policy on market power through new data and a new identification strategy. It uses a large data set containing export values and quantities by product and destination for all exporting firms in 12 developin...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/467281572356928847/Trade-Policy-and-Market-Power-Firm-Level-Evidence http://hdl.handle.net/10986/32659 |
| Summary: | This paper identifies the effect of
trade policy on market power through new data and a new
identification strategy. It uses a large data set containing
export values and quantities by product and destination for
all exporting firms in 12 developing and emerging countries
over several years, merged with destination-product-specific
information on tariffs and non-tariff barriers. Market power
is identified by observing how exporting firms price
discriminate across markets in reaction to variations in
bilateral exchange rates. Pricing-to-market is prevalent in
all regions of the sample, even among small firms, although
it is increasing in firm size, in accordance with theory.
More importantly, the effect of non-tariff measures is not
isomorphic to that of tariffs: the observed
pricing-to-market behavior suggests that, although tariffs
reduce the market power of foreign firms through classic
rent-shifting effects, non-tariff measures alter market
structure and reinforce the market power of non-exiting
firms, domestic and foreign ones alike. |
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