Effect of International Competition on Firm Productivity and Market Power / Jan De Loecker, Johannes Van Biesebroeck.

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De Loecker, Jan

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w21994.Publication details: Cambridge, Mass. National Bureau of Economic Research 2016.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We propose a framework to evaluate the potential impact of international competition on firm performance and highlight two points. First, it is important to consider effects on productive efficiency and market power in an integrated framework. The popular concept of (revenue) TFP combines both effects which can lead to problems of estimation and interpretation. Second, greater international competition enlarges the relevant market and can affect both the number and the type of competitors a firm faces, as well as the nature of competition. While it is possible that firms respond by adjusting their production operations, pricing adjustments are all but guaranteed. We contrast three estimation approaches that start, respectively, from the demand side, the product extensive margin, and the production side. We conclude with a few avenues for future research.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w21994 (Browse shelf(Opens below))	Not For Loan

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February 2016.

We propose a framework to evaluate the potential impact of international competition on firm performance and highlight two points. First, it is important to consider effects on productive efficiency and market power in an integrated framework. The popular concept of (revenue) TFP combines both effects which can lead to problems of estimation and interpretation. Second, greater international competition enlarges the relevant market and can affect both the number and the type of competitors a firm faces, as well as the nature of competition. While it is possible that firms respond by adjusting their production operations, pricing adjustments are all but guaranteed. We contrast three estimation approaches that start, respectively, from the demand side, the product extensive margin, and the production side. We conclude with a few avenues for future research.