U.S. Market Concentration and Import Competition

Moynihan Institute of Global Affairs' Trade, Development and Political Economy Series presents Mary Amiti. Many studies have documented that market concentration has risen among U.S. firms in recent decades. In this paper, we show that this rise in concentration was accompanied by tougher product market competition due to the entry of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in concentration was counteracted by the expansion of foreign firms, which reduced domestic firms’ share of the U.S. market inclusive of foreign firms’ sales. We find that once the sales of foreign exporters are taken into account, U.S. market concentration in manufacturing was stable between 1992 and 2012.

Mary Amiti is a Vice President at the Federal Reserve Bank of New York. Prior to joining the Bank, she held positions at the International Monetary Fund, World Bank, the University of Melbourne, and the University of Pompeu Fabra. She graduated with a PhD in Economics from the London School of Economics in 1997, with a specialization in international trade. She has published in leading journals such as the American Economic Review, Quarterly Journal of Economics, Review of Economic Studies, Review of Economics and Statistics, and Journal of International Economics. Her research interests include trade finance, the effects of trade liberalization on productivity, wages, the wage skill premium, and product quality.