Big-box retail stores arriving from foreign countries have transformed the way Mexican households shop for goods, sparking a “supermarket revolution”. Traditionally, consumers in developing countries have shopped at street markets and small, independent stores. However, consumers have switched to shopping at foreign retailers, who offer a larger variety of products at cheaper prices. Despite concerns that foreign retailers might adversely affect local employment and household incomes, our evidence shows that allowing them to operate their businesses in Mexico has generated substantial welfare gains for households across the income spectrum by lowering the cost of living, while having limited impacts on total employment, incomes, and local businesses closing.
The increasing globalization of the world economy is a prominent area of public debate. Issues of interest include the following:
The determinants of international trade and multinational activity
The implications of international trade and multinational activity for welfare and the distribution of income
The effects of trade liberalization on firm and aggregate productivity
The organization of firm production activities around the world
National trade policies and the World Trade Organization (WTO)
Do European car manufacturers make exclusive dealing contracts with their retailers to keep out new, smaller suppliers (mainly from Asia) and in turn, hurt competition? The manufacturing industry could collectively maintain an exclusive dealing system through a block exemption regulation, which would require exclusive dealing through manufacturers’ retailers. Our research shows that if these exclusive contracts were banned, consumers would benefit from allowing dealerships to have more than one supplier and consequently, more brands of cars in stock. However, consumers would not benefit much through increased price competition, in contrast to what is commonly believed.
Improved access to foreign inputs has increased firms’ productivity in a number of countries. Analysing data for Hungary, this research explores the channels through which imported inputs boost productivity and finds that the positive effects are particularly strong for foreign-owned firms.
How long should we expect the labor market transition following a trade liberalization episode to last? To what extent will the potential gains from trade be reduced due to the slow adjustment of the economy to the new trade equilibrium? What are the characteristics of the workers who will lose the most from trade liberalization?
In our globalized economy, information about the costs, benefits, and distributional consequences of lowering trade barriers is essential to policymakers trying to decide if a particular agreement should be supported. This research fills an important gap in our knowledge concerning the effects of reducing trade barriers when firms have some degree of monopoly power.
Many fear that climate change will have severe effects on the global economy, particularly through the threat to food production and farmers’ earnings. This research suggests that much of the potential harm could be avoided if farmers can switch their crops in response to changing relative yields.