OPENNESS TO TRADE AND INDUSTRY COST DISPERSION: EVIDENCE FROM A PANEL OF ITALIAN FIRMS* |
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| Authors: | Massimo Del Gatto Gianmarco I P Ottaviano Marcello Pagnini |
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| Institution: | 1. Dipartimento Ricerche Economiche e Sociali, Facoltá di Scienze Politiche, Università di Cagliari, Viale S. Ignazio 78, 09123 Cagliari, Italy. E‐mail: mdelgatto@unica.it;2. Dipartimento di Scienze Economiche, Università di Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy. E‐mail: gianmarco.ottaviano@unibo.it;3. Economic Research Unit, Bank of Italy, Bologna Main Branch, Piazza Cavour 6, 40124 Bologna, Italy. E‐mail: marcello.pagnini@bancaditalia.it |
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| Abstract: | ABSTRACT 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. |
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