GEP Research Paper 03/04
eldHow Much Trade Contributes to the Formation of Market Structure
D. Mirza
Abstract
Market structure is usually considered to be exogenous to trade flows in most empirical studies. This paper challenges this view by showing that the formation of market structure in an open economy is very closely related to trade quantities. We provide an original method, based on bilateral flows and activity data, that estimates the contribution of imports to national market structures in homogenous good industries. The method is based on a generalized Brander-Krugman framework. The results suggest that foreign contribution to concentration is around 30-50% for small European economies and 20-30% for bigger European countries. Market structure is less affected by openness however in the U.S and Japanese markets.
Issued in February 2003.
This paper is available in PDF format.