Trade Liberalization, Firm Performance and Labour Market Outcomes in the Developing World: What Can We Learn from Micro-LevelData?



the data, and hence they are better suited to isolate the pro-competitive effect of increased foreign
competition. The country studies show that, when industry dummies are included, evidence of a
significant pro-competitive effect of trade liberalization is found only in Colombia and Mexico.

3.1.2 Plant-level evidence

The country studies also examine the pro-competitive effect of foreign competition by looking at
plant-level evidence on price-costs margins. They use the following basic model:

PCMijt = f(Sijt,S2jt,IMPjt,Sijt IMPjt,Kjt∕Qjt,Ij,T)              (11)

where PCMij t is the price-cost margin of plant i in industry j and time t, Sijt is the share of plant
i’s output in sector j’s total domestic production, and the other variables in (11) have the same
interpretation as in equation (10). The interaction term
Sijt IMPjt tests the hypothesis that
the pro-competitive effect of foreign competition is stronger among firms with a higher domestic
market share.

The coefficient of the linear term Sijt is generally positive and significant, whereas that of the
quadratic term
Si2jt is generally negative. This suggests that price-costs margins rise at a decreasing
rate with market shares. More interestingly, in every country studied the coefficients on
IMPjt
and Sijt IMPjt are negative and highly significant, whereas industry dummies do not generally
have any explanatory power. Thus, exposure to foreign competition is associated with lower price-
cost margins, and the effect is concentrated among the large plants. This result suggests that
looking at plant-level evidence highlights a powerful and systematic pro-competitive role of foreign
competition.

3.2 Plant-level evidence on trade-induced productivity gains

The literature which uses plant-level data to investigate the productivity gains from trade liberal-
ization shows mixed results. Tybout, de Melo and Corbo (1991) find little evidence of productivity

13



More intriguing information

1. The name is absent
2. Innovation Policy and the Economy, Volume 11
3. Influence of Mucilage Viscosity On The Globule Structure And Stability Of Certain Starch Emulsions
4. fMRI Investigation of Cortical and Subcortical Networks in the Learning of Abstract and Effector-Specific Representations of Motor Sequences
5. The name is absent
6. Dual Track Reforms: With and Without Losers
7. Qualifying Recital: Lisa Carol Hardaway, flute
8. Parallel and overlapping Human Immunodeficiency Virus, Hepatitis B and C virus Infections among pregnant women in the Federal Capital Territory, Abuja, Nigeria
9. Commuting in multinodal urban systems: An empirical comparison of three alternative models
10. Land Police in Mozambique: Future Perspectives
11. The name is absent
12. Investment in Next Generation Networks and the Role of Regulation: A Real Option Approach
13. The ultimate determinants of central bank independence
14. Co-ordinating European sectoral policies against the background of European Spatial Development
15. The name is absent
16. THE WAEA -- WHICH NICHE IN THE PROFESSION?
17. Personal Income Tax Elasticity in Turkey: 1975-2005
18. Synthesis and biological activity of α-galactosyl ceramide KRN7000 and galactosyl (α1→2) galactosyl ceramide
19. The name is absent
20. Qualification-Mismatch and Long-Term Unemployment in a Growth-Matching Model