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TRADE POLICY AND MARKET POWER: FIRM‐LEVEL EVIDENCE
Author(s) -
Asprilla Alan,
Berman Nicolas,
Cadot Olivier,
Jaud Mélise
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12409
Subject(s) - market power , sample (material) , economics , factor market , domestic market , power (physics) , international economics , business , identification (biology) , monetary economics , industrial organization , international trade , microeconomics , monopoly , chemistry , physics , botany , chromatography , quantum mechanics , biology
This article identifies the effect of trade policy on market power through new data and a new identification strategy. We identify market power by observing how exporting firms price discriminate across markets following variations in bilateral exchange rates. Pricing‐to‐market is prevalent in all countries in our sample, even among small firms, although it is increasing in firm size. More importantly, we find that the effect of nontariff measures (NTMs) is not isomorphic to that of tariffs. Whereas tariffs reduce the market power of foreign firms through rent‐shifting effects, NTMs reinforce the market power of nonexiting firms, domestic and foreign alike.