FOREIGN TRADE AND DOMESTIC COMPETITION.

This paper contains estimates of the determinants of the commodity composition of U.S. trade flows and of price-cost margins in U.S. domestic manufacturing in a simultaneous context. Above-competitive profits in U.S. manufacturing appear to provide a powerful incentive to import competition. These imports, in turn, provide a check on the ability of domestic firms to earn monopoly rents. The estimates indicate that failure to account for imports leads to a substantial under-estimation of the impact of market structure on price-cost margins. The linkages between exports and domestic market conditions appear to be of second-order importance. [ABSTRACT FROM AUTHOR]