Citation

Discussion Paper Details

Please find the details for DP11114 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The effect of international competition on firm productivity and market power

Author(s): Jan De Loecker and Johannes Van Biesebroeck

Publication Date: February 2016

Keyword(s): competition, firm performance and trade liberalization

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: We propose a framework to evaluate the potential impact of international competition on firm performance and highlight two points. First, it is important to consider effects on productive efficiency and market power in an integrated framework. The popular concept of (revenue) TFP combines both effects which can lead to problems of estimation and interpretation. Second, greater international competition enlarges the relevant market and can affect both the number and the type of competitors a firm faces, as well as the nature of competition. While it is possible that firms respond by adjusting their production operations, pricing adjustments are all but guaranteed. We contrast three estimation approaches that start, respectively, from the demand side, the product extensive margin, and the production side. We conclude with a few avenues for future research.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11114

Bibliographic Reference

De Loecker, J and Van Biesebroeck, J. 2016. 'The effect of international competition on firm productivity and market power'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11114