Pro-competitive Effect of Trade and Non-decreasing Price-Cost Margins

This study surveys the empirical evidence on the pro-competitive effect of international trade and analyses the determinants of price-cost margins for OECD countries between 1970 and 2003. The main objective was to focus on the quantification of the impact of imports on margins, and understand why, despite trade liberalization, price-cost margins have not fallen overall. On average, imports would have contributed to a large decrease of five percentage points in the price-cost margins. However, these effects seem to have been partially counterbalanced by the impacts of financial deepening and disinflation.