Daniele Verdini
IRES/LIDAM, UCLouvain
will give a presentation on
The Anticompetitive Effect of Trade Liberalizations
Abstract:
Recent decades have been characterized by a surgein firms' market power both in the U.S. and the EU. In this paper, we study the role played by globalization in determining the observed evolution of markups and other measures of market power. We use detail firm-level balance sheet and trade data for Belgian manufacturing over the period 2000-2015 to estimate firm-level markups in the manufacturing sector. Building on the identification strategy proposed in Acemoglu et al. (2016), we provide a causal analysis of the impact of rising trade exposure on various measures of market power. We estimate that, following the surge of Chinese trade with Belgium, in relatively more exposed industries the aggregate markup increases over time, in particular using conservative estimates, we quantify the impact of China to account for a fourth of the total increase in markups over the period. We further find evidence of increasing market concentration and markup dispersion going along increasing aggregate productivity. These changes are not driven by reallocation between firms, but by within adjustments of the incumbents. Overall, these evidences point to a winner-take-all type of rational behind the observed increase in market power.