Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315941 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1685
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
Research about trade liberalization's impact on markups has focused on manufacturing due to data availability considerations. How do these effects vary across sectors? Which industries become more and less competitive as trade barriers are eliminated? We leverage firm-level tax records from the universe of formal-sector businesses in Costa Rica with the 2009 trade liberalization as a natural experiment to evaluate its industry-specific effects on markups across all industries. We find negative effects on markups in agriculture, mining, electricity, water supply, and business services. Alternatively, the reform led to markup increases in accommodations and food services, information and communications, real estate, finance and insurance, and education, health, and social work. We do not observe statistically significant effects in manufacturing, transportation and storage, construction, and wholesale and retail trade. Our findings represent a more comprehensive evaluation of the potential pro-competitive effects from trade liberalization than existing studies exclusively focusing on manufacturing firms.
Subjects: 
Market power
Markup
Costa Rica
Latin America
Trade
Liberalization
Tarif
JEL: 
D22
L11
F13
F14
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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