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

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Abstract:

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.

Document Type: Research Article

DOI: https://doi.org/10.1111/j.1467-9787.2008.00546.x

Affiliations: 1: Dipartimento Ricerche Economiche e Sociali, Facoltá di Scienze Politiche, Università di Cagliari, Viale S. Ignazio 78, 09123 Cagliari, Italy., Email: mdelgatto@unica.it 2: Dipartimento di Scienze Economiche, Università di Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy., Email: gianmarco.ottaviano@unibo.it 3: Economic Research Unit, Bank of Italy, Bologna Main Branch, Piazza Cavour 6, 40124 Bologna, Italy., Email: marcello.pagnini@bancaditalia.it

Publication date: 2008-02-01

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