Research On The Influence Of Trade Liberalization On The Industry's Markup

Compared with the current research which made a study on the markup of exporters and non-exporters based on the database of China's industrial enterprises from the aspects of productivity,product quality and target market characteristics,this paper rises the research perspective from the firm level to the industry level.We adopt the WIOD database which included all data of 35 sub-sectors in 40 countries or regions during 1995-2011 and using the DLW method to estimate the markup of the sample industry and applied it to China and other countries separately.Besides,we make a comprehensive analysis of the impact mechanism of trade liberalization on the markup rate and make an empirically study on the relationship between the degree of trade liberalization and the industry's markup rate.The result is that there is a significant negative correlation between the degree of trade liberalization and the industry's markup,and the "price reduction effect" triggered by trade liberalization and exacerbated by market competition is greater than the "price increase effect" brought about by improving the overall efficiency of the industry and improving product quality.With the deepening of the trade liberalization,the markup in different industries gradually converges,therefore,trade liberalization to a certain extent explains the "mystery of low-markup."On the whole,trade liberalization expands the market size.Homogeneous companies face more competitors,and the survival of the fittest among the firms will ultimately manifest itself in lower markup and prices,that is,market monopoly will become lower and lower.The welfare losses due to monopoly will also be avoided,so as to achieve the best allocation of resources and improve the welfare level as a whole.