Citation

Discussion Paper Details

Please find the details for DP2853 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Mark-ups, Entry Regulation and Trade: Does Country Size Matter?

Author(s): Bernard Hoekman, Hiau Looi Kee and Marcelo Olarreaga

Publication Date: July 2001

Keyword(s): country size, entry regulation, import penetration and industry markup

Programme Area(s): International Trade and Regional Economics

Abstract: Actual and potential competition is a powerful source of discipline on the pricing behavior of firms with market power. A simple model is developed that shows that the effects of import competition and domestic entry regulation on industry price-cost markups depend on country size. Barriers to domestic entry are predicted to have stronger anti-competitive effects in large countries, whereas the impact of barriers to foreign entry (i.e., imports) should be stronger in small countries. Following estimation of markups for manufacturing sectors in 41 developed and developing countries, these hypotheses are tested and cannot be rejected by the data. For example, although Italy and Indonesia impose the same number of regulations on entry of new firms, their impact on manufacturing markups is 20 percent higher in Italy due to its larger size. Similarly, Chile and Zimbabwe have the same import penetration ratio, but the market discipline effect of imports on markups is 13 percent higher in Zimbabwe due to its smaller size.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2853

Bibliographic Reference

Hoekman, B, Kee, H and Olarreaga, M. 2001. 'Mark-ups, Entry Regulation and Trade: Does Country Size Matter?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2853