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Trade Policy and Market Power: Firm-level Evidence

Author

Listed:
  • Alan ASPRILLA

    (FERDI)

  • Nicolas BERMAN

    (FERDI)

  • Olivier CADOT

    (Faculté des hautes études commerciales - Université de Lausanne)

  • Melise JAUD

    (FERDI)

Abstract

This paper identifies the effect of trade policy on market power through new data and a new identication strategy. We use a large dataset 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. We identify market power 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 our sample, even among small firms, although it is increasing in firm size, in accordance with theory. More importantly, we find that the effect of non-tariff measures is not isomorphic to that of tariffs: the pricing-to-market behavior we observe suggests that, while 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. Keywords: Trade policy, non-tariff measures, tariffs, exchange rate, price discrimination

Suggested Citation

  • Alan ASPRILLA & Nicolas BERMAN & Olivier CADOT & Melise JAUD, 2016. "Trade Policy and Market Power: Firm-level Evidence," Working Papers P161, FERDI.
    • Handle: RePEc:fdi:wpaper:3139
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    Cited by:

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    2. Cali,Massimiliano & Montfaucon,Angella Faith Lapukeni, 2021. "Non-Tariff Measures, Import Competition, and Exports," Policy Research Working Paper Series 9801, The World Bank.
    3. Vincent Rebeyrol, 2023. "Protection Without Discrimination," The Economic Journal, Royal Economic Society, vol. 133(655), pages 2807-2827.
    4. Benedikt Heid & Frank Stähler, 2024. "Disentangling Frictions Across the World: Markups Versus Trade Costs," CESifo Working Paper Series 11420, CESifo.
    5. Lili Yan Ing & Olivier Cadot & Muhammad Rizqy Anandhika & Shujiro Urata, . "Non-Tariff Measures in ASEAN: A Simple Proposal," Chapters, in: Lili Yan Ing & Santiago Fernandez de Cordoba & Olivier Cadot (ed.), Non-Tariff Measures in ASEAN, chapter 2, pages 13-36, Economic Research Institute for ASEAN and East Asia (ERIA).
    6. Arnaud Z. Dragicevic, 2019. "Market Coordination Under Non-Equilibrium Dynamics," Networks and Spatial Economics, Springer, vol. 19(3), pages 697-715, September.
    7. Clément Nedoncelle & Julien Wolfersberger, 2024. "Weather Shocks and Firm Exports in Developing Countries [Chocs météorologiques et exportations des firmes dans les pays en développement]," Working Papers hal-03753384, HAL.
    8. Georg Schneider & Frank Stähler & Georg U. Thunecke, 2022. "The (Non-)Neutrality of Value-Added Taxation," CESifo Working Paper Series 9663, CESifo.
    9. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    10. Olivier CADOT & Patricia AUGIER & Marion DOVIS, 2016. "Regulatory harmonization, profits, and productivity: Firm-level evidence from Morocco," Working Papers P162, FERDI.
    11. Curzi, Daniele & Schuster, Monica & Maertens, Miet & Olper, Alessandro, 2020. "Standards, trade margins and product quality: Firm-level evidence from Peru," Food Policy, Elsevier, vol. 91(C).
    12. Dolabella, Marcelo, 2020. "Bilateral effects of non-tariff measures on international trade: Volume-based panel estimates," Comercio Internacional 46014, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Shingal, Anirudh & Ehrich, Malte, 2024. "The EU’s pesticides MRLs harmonization: effect on trade, prices and quality," Food Policy, Elsevier, vol. 125(C).
    14. Macedoni, Luca & Weinberger, Ariel, 2022. "Quality heterogeneity and misallocation: The welfare benefits of raising your standards," Journal of International Economics, Elsevier, vol. 134(C).
    15. Dela-Dem Doe Fiankor & Daniele Curzi & Alessandro Olper, 2021. "Trade, price and quality upgrading effects of agri-food standards [Endogenous Trade Policy with Heterogeneous Firms]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 835-877.
    16. Ariel Weinberger & Luca Macedoni, 2023. "International Spillovers of Quality Regulations," Working Papers 2023-10, The George Washington University, Institute for International Economic Policy.
    17. Dela‐Dem Doe Fiankor & Oliver‐Ken Haase & Bernhard Brümmer, 2021. "The Heterogeneous Effects of Standards on Agricultural Trade Flows," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 25-46, February.
    18. Yang, Qizhong, 2024. "Heterogeneous impact of non-tariff measures on import margins through global value chains: Firm-level evidence from China," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 533-562.
    19. Rashid, Muhammad Mustafa, 2018. "Repercussions of International Trade on the Market Power of Firms in Different Market Structures," MPRA Paper 89889, University Library of Munich, Germany.
    20. Luca Macedoni & Ariel Weinberger, 2021. "Quality Misallocation, Trade, and Regulations," CESifo Working Paper Series 9041, CESifo.

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    More about this item

    Keywords

    trade policy; non-tariff measures; tariffs; exchange rate; price discrimination;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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