Markups, Market Imperfections, and Trade Openness : Evidence from Ghana
This paper investigates the impact of Ghana's World Trade Organization (WTO) accession on firm-level product and labor market imperfections. The paper exploits a rich dataset of firm-level information to estimate both markups and the degree of...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/414481576075847938/Markups-Market-Imperfections-and-Trade-Openness-Evidence-from-Ghana http://hdl.handle.net/10986/33023 |
| Summary: | This paper investigates the impact of
Ghana's World Trade Organization (WTO) accession on
firm-level product and labor market imperfections. The paper
exploits a rich dataset of firm-level information to
estimate both markups and the degree of monopsony power
enjoyed by manufacturing firms. The results indicate that
price-cost margins declined while the degree of monopsony
power increased in the wake of WTO accession. These
diverging dynamics suggest that firms compress real wages to
offset loss of market power in the product market due to
increased international competition. This gives rise to an
increase in the market imperfection gap, which gradually
erodes the pro-competitive gains from trade. The paper
contributes to the literature by identifying channels
through which allocative inefficiencies and misallocation
can persist even after trade liberalization. |
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