Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101048
Authors: 
Olper, Alessandro
Curzi, Daniele
Pacca, Lucia
Year of Publication: 
2013
Series/Report no.: 
LICOS Discussion Paper Series 337
Abstract: 
Melitz and Ottaviano's (2008) firm-heterogeneity model predicts that trade liberalization induces a selection process from low to high productivity firms, which translates to an industry productivity growth. A similar firms' selection effect is induced by market size. In this paper, these predictions are tested across 25 European countries and 9 food industries, over the 1995-2008 period. Using different dynamic panel estimators we find strong support for the model predictions, namely that an increase in import penetration is systematically positively related to productivity growth. The results are robust to measurement issues in productivity, controlling for market size, country and sector heterogeneities, and for the endogeneity of import competition. Interestingly, this positive relationship is almost exclusively driven by competition in final products coming from developed (especially EU-15) countries, suggesting that EU food imports are closer substitutes for domestic production than non-EU imports. These results have some potentially interesting policy implications.
Subjects: 
Import competition
Productivity growth
Food Industry
European Countries
GMM
JEL: 
F13
F14
Q17
Document Type: 
Working Paper

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