Journal Article

Intra-Industry Adjustment to Import Competition: Theory and Application to the German Clothing Industry

Authors

  • Horst Raff
  • Joachim Wagner
Publication Date

This paper uses an oligopoly model with heterogeneous firms to examine how an industry adjusts to rising import competition. The model predicts that in the short run the least efficient firms in the industry become inactive, surviving firms face a fall in output, mark-ups and profits, and the average productivity of survivors increases. These pro-competitive effects of import penetration on the domestic industry disappear in the long run. The predictions for the short run are confirmed in an empirical study of the German clothing industry.

Info

JEL Classification
F12, F15
DOI
10.1111/j.1467-9701.2010.01310.x

Key Words

  • clothing industry
  • firm heterogeneity
  • international trade
  • Internationaler Handel
  • productivity
  • Produktivität