Paper title: The Anticompetitive Effect of Trade Liberalization
Lorenzo Trimarchi (Université de Namur) joint work with Catherine Fuss (National Bank of Belgium) and Daniele Verdini (Université Catholique de Louvain, FNRS)

Abstract:

Recent decades have been characterized by a surge in firms’ market power within the global economy. In this paper, we study the role played by globalization in determining the evolution of markups in the small open economy of Belgium. Using detailed balance sheets and trade data for manufacturing firms over the period 2000-2015, we provide evidence of the role played by Chinese import competition on the evolution of various measures of market power. According to our estimates, the China shock increased aggregate markups and induced higher market concentration and markup dispersion. These changes are driven not by the reallocation of market shares towards high-markup firms but by increases within incumbents along with productivity gains. Our findings suggest a winner-take-most type of rationale behind the observed increase in market power.

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