Import Competition and Market Power: Canadian Evidence

This paper estimates price-marginal cost mark-ups for Canadian manufacturing industries during the 1970s in order to assess the impact of import competition on domestic market power. The results are mixed. Based on the analysis, there is no consistent evidence that imports had a beneficial impact on competition in the Canadian market during that period. One possible explanation for this finding is that trade may have differential impacts among firms within industries. Detailed firm-level analysis may therefore provide a more complete understanding of the impact of imports on competition.