EconPapers    
Economics at your fingertips  
 

Prices, Markups and Trade Reform

Pinelopi Goldberg, Nina Pavcnik, Jan De Loecker and ,
Authors registered in the RePEc Author Service: Amit Khandelwal

No 8900, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines how prices, markups and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi-product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity-based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India?s trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory-gate prices. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason is that firms offset their reductions in marginal costs by raising markups. This limited pass-through of cost reductions attenuates the reform?s impact on prices. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms. To the extent that higher firm profits lead to the new product introductions and growth, long-term gains to consumers may be substantially higher.

Keywords: Markups; Productivity; Pass-through; Input tariffs; Trade liberalization (search for similar items in EconPapers)
JEL-codes: F01 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-hme and nep-int
References: Add references at CitEc
Citations: View citations in EconPapers (102)

Downloads: (external link)
https://cepr.org/publications/DP8900 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Prices, Markups, and Trade Reform (2016) Downloads
Working Paper: Price, Markups and Trade Reforms (2014) Downloads
Working Paper: Prices, markups and trade reform (2012) Downloads
Working Paper: Prices, markups and trade reform (2012) Downloads
Working Paper: Prices, Markups and Trade Reform (2012) Downloads
Working Paper: Prices, Markups and Trade Reform (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:8900

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8900

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2024-12-28
Handle: RePEc:cpr:ceprdp:8900
            
pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy