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Competition and imports in the European market

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  • André Sapir
  • Alexis Jacquemin

Abstract

Theoretical and empirical research suggests that import competition within European markets imposes a major constraint on domestic firms's price-cost margins. The programme for the completion of the European Community's (EC) internal market by 1992 is largely based on the effects expected from a reinforcement of such a constraint. But imports from the rest of the world could also exercise an important trade discipline on European market performance. In fact there are various arguments suggesting that the disciplinary effect of extra-EC imports could be stronger than that of intra-EC imports. The paper develops an empirical model to measure the relative strength of import discipline on price-cost margins in European industries. We find that both potential and actual competition induced by imports are effective in narrowing such margins. Furthermore, trade discipline varies not only according to various features of industry but also according to the origin of imports: only extra-EC imports were found to exercise a significant impact on price-cost margins.
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Suggested Citation

  • André Sapir & Alexis Jacquemin, 1991. "Competition and imports in the European market," ULB Institutional Repository 2013/8220, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/8220
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    Cited by:

    1. Sabien Dobbelaere & Mark Vancauteren, 2014. "Market imperfections, skills and total factor productivity : Firm-level evidence on Belgium and the Netherlands," Working Paper Research 267, National Bank of Belgium.
    2. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2001. "The dynamics of industrial mark-ups in two small open economies: does national competition policy matter?," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 841-859, April.
    3. Nunnenkamp, Peter, 1993. "Handelspolitischer Kompensationsbedarf aufgrund des EG-Binnenmarktprogramms," Open Access Publications from Kiel Institute for the World Economy 1569, Kiel Institute for the World Economy (IfW Kiel).
    4. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 2008 - 2015 192, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Lundin, Nan Nan, 2003. "Has Import Disciplined Swedish Manufacturing Firms in the 1990s?," Working Paper Series 192, Trade Union Institute for Economic Research.
    6. Nunnenkamp Peter, 1994. "Nach der Uruguay-Runde: Triebkräfte und Sprengsätze für die Weltwirtschaft," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 43(1-3), pages 251-270, June.
    7. Castillo, Leopoldo Laborda & Salem, Daniel Sotelsek & Guasch, Jose Luis, 2012. "Innovative and absorptive capacity of international knowledge : an empirical analysis of productivity sources in Latin American countries," Policy Research Working Paper Series 5931, The World Bank.
    8. Alexis Jacquemin, 1995. "Towards an Internationalisation of Competition Policy," The World Economy, Wiley Blackwell, vol. 18(6), pages 781-789, November.
    9. Langhammer, Rolf J. & Schweickert, Rainer, 2006. "EU integration and its implications for Asian economies: What we know and what not," Kiel Working Papers 1264, Kiel Institute for the World Economy (IfW Kiel).
    10. Georges Siotis, 2000. "Market Power, Total Factor Productivity Growth, and Structural Change. An Illustration for Spain, 1983-1996," Working Papers 0001, Banco de España.
    11. Langhammer, Rolf J. & Schweickert, Rainer, 2006. "EU integration and its implications for Asian economies: What we do and do not know," Journal of Asian Economics, Elsevier, vol. 17(3), pages 395-416, June.
    12. Hiemenz, Ulrich (Ed.) & Gundlach, Erich (Ed.), 1994. "Regional integration in Europe and its effects on developing countries," Open Access Publications from Kiel Institute for the World Economy 794, Kiel Institute for the World Economy (IfW Kiel).
    13. Gaëtan Nicodème & Jacques-Bernard Sauner-Leroy, 2007. "Product Market Reforms and Productivity: A Review of the Theoretical and Empirical Literature on the Transmission Channels," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 53-72, March.
    14. Yongcheol Shin & Laura Serlenga, 2004. "Gravity Models of the Intra-EU Trade: Application of the Hausman-Taylor Estimation in Heterogeneous Panels with Common Time-specific Factors," Econometric Society 2004 Far Eastern Meetings 671, Econometric Society.
    15. Co, Catherine Y., 2001. "Trade, foreign direct investment and industry performance," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 163-183, January.
    16. Lundin, Nan Nan, 2004. "Import Competition, Product Differentiation and Mark-Ups - Microeconomic evidence from Swedish manufacturing in the 1990s," Working Paper Series 195, Trade Union Institute for Economic Research.
    17. Nunnenkamp, Peter, 1993. "The world trading system at the crossroads: multilateral trade negotiations in the era of regionalism," Kiel Discussion Papers 204, Kiel Institute for the World Economy (IfW Kiel).
    18. Patrick Messerlin, 2006. "Europe after the 'no' votes : mapping a new economic path," Post-Print hal-00973109, HAL.
    19. Nan Nan Lundin, 2004. "Has Import Disciplined Swedish Manufacturing Firms in the 1990s?," Journal of Industry, Competition and Trade, Springer, vol. 4(2), pages 109-133, June.
    20. Vosgerau, Hans-Jürgen, 1993. "Trade policy and competition policy in Europe: Complementarities and contradictions," Discussion Papers, Series II 198, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    21. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
    22. Patrick Messerlin, 2006. "Europe after the 'no' votes : mapping a new economic path," SciencePo Working papers Main hal-00973109, HAL.

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