Working Paper: CEPR ID: DP6336
Authors: Massimo Del Gatto; Gianmarco I.P. Ottaviano; Marcello Pagnini
Abstract: We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.
Keywords: Cost Dispersion; Firm Selection; Firm-Level Data; Openness to Trade; Total Factor Productivity
JEL Codes: F12; F15; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower trade costs (F19) | lower central tendency of marginal costs (D40) |
| lower trade costs (F19) | smaller interquartile range of costs (D61) |
| trade openness (F43) | cost dispersion (D39) |
| higher export orientation (F10) | lower cost dispersion (D39) |