OPENNESS TO TRADE AND INDUSTRY COST DISPERSION: EVIDENCE FROM A PANEL OF ITALIAN FIRMS

ABSTRACT 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...

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Bibliographic Details
Published in:Journal of regional science 2008-02, Vol.48 (1), p.97-129
Main Authors: Del Gatto, Massimo, Ottaviano, Gianmarco I. P., Pagnini, Marcello
Format: Article
Language:English
Subjects:
Bias
Competition
Cost analysis
Enterprises
Impact analysis
Industrial organization
International competition
International trade
Italy
Marginal costs
Open economies
Regional economics
Regional studies
Regression analysis
Studies
Total factor productivity
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Summary:ABSTRACT 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.
ISSN:0022-4146
1467-9787
DOI:10.1111/j.1467-9787.2008.00546.x