Import Liberalization, Network Characteristics And Markups

China has gradually changed policy from restricted trade to free trade after joining the WTO,and the degree of import liberalization has deepened.Based on the upstream and downstream perspective,this paper discusses the impact of import liberalization and network characteristics on the firm's markups.Three questions are explained here:(1)what is the impact of import liberalization on markups in the upstream and downstream perspective?(2)whether network characteristics have an impact on markups?(3)whether network characteristics have a moderating effect on import liberalization effect?In this paper,firstly,the author makes a comprehensive analysis of the existing domestic and foreign literature and puts forward three research hypothesis.Based on the principle of economics and existing literature,this paper not only studies the competition effect and learning effect of import liberalization,but also introduces industries' upstream and downstream contact and network characteristics theory to the mechanism,which is an important innovation.Secondly,in the empirical aspect,based on the industrial enterprise database,input-output table and UN Comtrade Database,the markups and import penetration rates of manufacturing enterprises are calculated during the period of 1999-2007.In addition,the paper establishes an input-output network of 64 manufacturing industries.Next,this paper uses mixed effects,fixed effects,and DID-PSM method to test our research hypothesis,and verifies the robustness of the results.The main conclusions of this paper are including:(1)the competition effects of import liberalization is greater than the learning effect,causing the profits of domestic corporations declining.;(2)if the import liberalization of upstream industry rises,the production cost of downstream enterprises will decrease in general.And import liberalization may also bring the knowledge spillover to downstream enterprises,which has a positive effect to firms' markups;(3)network characteristics have moderating effects on the relationship between import liberalization and markups;(4)with the spreading of the upstream import liberalization,the markups raise more if the enterprises have higher network centrality,contact strength or heterogeneity in the input-output network.