The pro-competitive effects of trade agreements

• 成果类型: Article
• 署名作者: Crowley, Meredith A.; Han, Lu; Prayer, Thomas
• 署名单位: University of Cambridge; Centre for Economic Policy Research - UK; Bank of Canada; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.103936
• 发表日期: 2024
• 关键词: TRADE AGREEMENTS; Variable markups; Markup elasticity; Trade elasticity; COMPETITION POLICY; Firm level data

摘要

How does trade policy affect competition? Using the universe of product exports by firms from eleven low and middle income countries, we document that tariff reductions under trade agreements have strong pro-competitive effects - they encourage entry and reduce the (tariff exclusive) price-cost markups of exporters. This finding, that markups fall with tariff cuts, contradicts a core prediction of standard oligopolistic competition models of trade. We extend a workhorse international pricing model of oligopolistic competition to include multiple countries and a rich preference structure. Our preference structure allows for fierce competition among firms from the same country and less intense competition among firms from different countries. We show a firm's optimal markup after a tariff cut can rise or fall depending on the parameters of the preference structure and tariff-induced reallocation of market share among firms and across countries.