Working Paper: NBER ID: w9947
Authors: Erkan Erdem; James Tybout
Abstract: Firm- and plant-level empirical studies typically find that trade liberalization squeezes price-cost margins among import-competing firms, that this heightened competitive pressure induces productivity gains among these same firms, and that further efficiency gains come from market share reallocations. Using a computable industrial evolution model to simulate the dynamic effects of import competition, we demonstrate what types of managerial behavior, long-term transition paths and welfare effects are consistent with this set of stylized facts.
Keywords: No keywords provided
JEL Codes: F1; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Import Competition (L13) | Productivity Gains (O49) |
| Productivity Gains (O49) | Managerial Behavior (D22) |
| Productivity Gains (O49) | Welfare Effects (D69) |
| Trade Liberalization (F13) | Squeezing of Price-Cost Margins (L11) |
| Squeezing of Price-Cost Margins (L11) | Productivity Gains (O49) |
| Productivity Gains (O49) | Market Share Reallocations (L17) |
| Transitory Productivity Gains (O49) | Long-Term Quality Deterioration (L15) |
| Increased Competition (L13) | Job Creation and Destruction (J63) |
| Welfare Effects (D69) | Consumer Welfare Gains (D69) |