Andrés Pérez Corsini

This paper studies the effect of the China Shock on US markups using a difference-in-differences empirical design. I find that lowering tariffs on imports from China had a pro-competitive effect on US firms by interrupting the rising trajectory of markups. More specifically, firms facing the threat of import competition reduced the growth of their markups by 0.5 percentage points following US normalization of trade relations with China. The pro-competitive effect operated most clearly through intermediate goods, affecting both growth rates and to some extent levels. I also find a negative downstream effect of trade liberalization on markups, contradicting potential anticompetitive effects of increased import competition.