1. Trade Policy and Market Power: Firm-Level Evidence
- Author
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Melise Jaud, Nicolas Berman, Alan Asprilla, Olivier Cadot, Université de Lausanne (UNIL), Aix-Marseille Sciences Economiques (AMSE), École des hautes études en sciences sociales (EHESS)-Aix Marseille Université (AMU)-École Centrale de Marseille (ECM)-Centre National de la Recherche Scientifique (CNRS), Center for Economic Policy Research (CEPR), CEPR, Fondation pour les Etudes et Recherches sur le Développement International (FERDI), La Banque mondiale - The World Bank, An early version of this article wasprepared as a background paper for the World Bank’s 'Champions Wanted' regional study and draws on prior re-search undertaken with support from the International Growth Center., Support from France’s Agence Nationale de la Recherche under 'Investissement d’Avenir' grant ANR-10-LABX-14-01 and from Switzerland’s NCCR under WP6,as well as from the governments of Norway, Sweden, and the United Kingdom through the Multi-Donor Trust Fund for Trade and Development are gratefully acknowledged., Mélise Jaud appreciates financial support from the SwissNational Science Foundation. The project leading to this publication has received funding from Excellence Initiative of Aix-Marseille University—A*MIDEX, a French 'Investissements d’Avenir' programme and from the French National Research Agency Grant ANR-17-EURE-0020., ANR-10-LABX-0014,IDGM+,Designing new international development policies from research outcomes. An enhanced(2010), ANR-11-IDEX-0001,Amidex,INITIATIVE D'EXCELLENCE AIX MARSEILLE UNIVERSITE(2011), ANR-17-EURE-0020,AMSE (EUR),Aix-Marseille School of Economics(2017), Université de Lausanne = University of Lausanne (UNIL), The World Bank, École des hautes études en sciences sociales (EHESS)-École Centrale de Marseille (ECM)-Centre National de la Recherche Scientifique (CNRS)-Aix Marseille Université (AMU), and Lai Tong, Charles
- Subjects
Economics and Econometrics ,MARKET POWER ,JEL: D - Microeconomics/D.D4 - Market Structure, Pricing, and Design/D.D4.D40 - General ,tariffs ,PRICE DISCRIMINATION ,Sample (statistics) ,Price discrimination ,exchange rate ,EXCHANGE RATES ,price discrimination ,Market structure ,Exchange rate ,EXPORT FIRMS ,0502 economics and business ,ddc:330 ,Economics ,F12 ,Market power ,F13 ,050207 economics ,Emerging market economies ,[SHS.ECO] Humanities and Social Sciences/Economics and Finance ,Emerging markets ,JEL: F - International Economics/F.F1 - Trade/F.F1.F12 - Models of Trade with Imperfect Competition and Scale Economies • Fragmentation ,EMERGING MARKET ECONOMIES ,F31 ,050205 econometrics ,Commercial policy ,F14 ,JEL: F - International Economics/F.F1 - Trade/F.F1.F14 - Empirical Studies of Trade ,05 social sciences ,JEL: F - International Economics/F.F3 - International Finance/F.F3.F31 - Foreign Exchange ,TARIFFS ,International economics ,NON-TARIFF BARRIERS ,[SHS.ECO]Humanities and Social Sciences/Economics and Finance ,Identification (information) ,non-tariff measures ,D40 ,trade policy ,JEL: F - International Economics/F.F1 - Trade/F.F1.F13 - Trade Policy • International Trade Organizations ,Business ,TRADE POLICY - Abstract
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.
- Published
- 2019
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