No. 635 - Openness to trade and industry cost dispersion: Evidence from a panel of Italian firms

Temi di discussione (Working papers)
by Massimo Del Gatto, Gianmarco I.P. Ottaviano and Marcello Pagnini
June 2007
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We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.

Published in 2008 in: Journal of Regional Science, v. 48, 1, pp. 97–129

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  1. 20 July 2007
    No. 635 - Openness to trade and industry cost dispersion: Evidence from a panel of Italian firms
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