THE EFFECT OF RISING IMPORT COMPETITION ON MARKET POWER - A PANEL-DATA STUDY OF US MANUFACTURING

The rapid rise in import competition in recent years provides an unusu al test for examining the market structure performance relationship wi th panel data. A weakness of the cross-sectional approach is that many important variables are difficult to measure. However, if these varia bles are determined by slowly evolving technological conditions and if there is time-series variation in an observable variable such as impo rt shares, then the use of a ''within-industry'' estimator may control for some of the problems confronting cross-section studies. Our estim ates indicate a sizable effect of import competition on price-cost mar gins for the time period 1976-1986.