The heterogeneous competitive effects of trade and foreign direct investment: Firm-level evidence for European countries
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In: World Economy, Vol. 41, No. 3, 03.2018, p. 801-830.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - The heterogeneous competitive effects of trade and foreign direct investment
T2 - Firm-level evidence for European countries
AU - Weche, John P.
PY - 2018/3
Y1 - 2018/3
N2 - This study evaluates the pro-competitive effect of foreign market penetration with a broad firm-level database that covers manufacturing industries in six European countries. The main contribution is the demonstration of the heterogeneous effects on host country competition of the two main channels of foreign market penetration that have been assigned fundamental differences by economic theory: imports and foreign direct investment. The results of dynamic estimates of firm-level markups reveal a pro-competitive effect of imports, while foreign direct investment shows no clear overall impact, suggesting a cancelling out of competitive pressure and spillovers. These findings matter for both future empirical research and policy considerations that must weigh the positive and negative effects of foreign market integration on the competitive environment and consumer welfare.
AB - This study evaluates the pro-competitive effect of foreign market penetration with a broad firm-level database that covers manufacturing industries in six European countries. The main contribution is the demonstration of the heterogeneous effects on host country competition of the two main channels of foreign market penetration that have been assigned fundamental differences by economic theory: imports and foreign direct investment. The results of dynamic estimates of firm-level markups reveal a pro-competitive effect of imports, while foreign direct investment shows no clear overall impact, suggesting a cancelling out of competitive pressure and spillovers. These findings matter for both future empirical research and policy considerations that must weigh the positive and negative effects of foreign market integration on the competitive environment and consumer welfare.
KW - competition
KW - efficiency
KW - foreign direct investment
KW - markups
KW - spillovers
KW - trade
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=85039171135&partnerID=8YFLogxK
U2 - 10.1111/twec.12590
DO - 10.1111/twec.12590
M3 - Journal articles
AN - SCOPUS:85039171135
VL - 41
SP - 801
EP - 830
JO - World Economy
JF - World Economy
SN - 0378-5920
IS - 3
ER -