- University of Trento
Wednesday, January 10, 2018
The paper investigates the impact of import competition on firm behavior, focusing in particular on rent sharing between employers and employees.
First, by applying recent advances in the estimation of price-costs margins to a large panel of French manufacturing firms for the period 1993-2007, we are able to classify each firm into six different market regimes based on the presence/absence of market power in both the labor and product markets.
Second, we concentrate on firms that operate in an efficient bargaining framework to study the effect of import penetration on workers' bargaining power.
We find that imports from other OECD countries have a small negative effect, whereas Chinese competition leads French firms to upgrade the quality of their products, and in this way it increases the bargaining power of workers.
Our results suggest that both the origin of imports and firm-level characteristics play a role in determining the overall effect of international competition.
By providing firm-level evidence on the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalization on product and labor markets.
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- Publication date
February 14, 2017