Import competition and industry location in a small‐country model of productivity growth. Issue 4 (16th April 2021)

• Record Type: Journal Article
• Authors: Davis, Colin; Hashimoto, Ken‐ichi
• Is Part Of: Review of international economics. Volume 29:Issue 4(2021)
• Page Start: 1046
• Page End: 1064
• Publication Date: 2021-04-16
• Subjects: International economic relations -- Periodicals; International finance -- Periodicals; Economic policy -- Periodicals; 330
• DOI: 10.1111/roie.12535
• Languages: English
• ISSNs: 0965-7576

Abstract

Abstract: We study how import competition affects the regional concentration of industry location in a small open economy with two regions. Industry concentration is linked with firm‐level investment in process innovation through an import competition effect that is increasing in the market share of imported goods and the productivity differential of domestic firms with the rest of the world. We show that increased import competition, through a larger number of imported goods or a faster international rate of productivity growth, leads to greater regional industry concentration by reducing domestic market entry and decreasing the relative productivity of domestic firms.