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OPENNESS TO TRADE AND INDUSTRY COST DISPERSION: EVIDENCE FROM A PANEL OF ITALIAN FIRMS *
Author(s) -
Del Gatto Massimo,
Ottaviano Gianmarco I. P.,
Pagnini Marcello
Publication year - 2008
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.2008.00546.x
Subject(s) - openness to experience , imperfect competition , competition (biology) , marginal cost , panel data , dispersion (optics) , economics , distribution (mathematics) , imperfect , industrial organization , econometrics , microeconomics , psychology , social psychology , ecology , mathematical analysis , linguistics , physics , philosophy , mathematics , optics , biology
We use Italian firm‐level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm‐level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.