FDI, Market Power, and Markups : Evidence from Vietnam
To date, the impact of foreign direct investment on market power and consumer welfare in developing countries has been relatively understudied. Utilizing a firm survey dataset from Vietnam, this paper first calculates firm-level markups for manufac...
| Main Authors: | , , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099233104062246175/IDU0d919c31a0a8aa048c7090f605fdc84b632b0 http://hdl.handle.net/10986/37284 |
| Summary: | To date, the impact of foreign direct
investment on market power and consumer welfare in
developing countries has been relatively understudied.
Utilizing a firm survey dataset from Vietnam, this paper
first calculates firm-level markups for manufacturing firms
and then analyzes the impact of foreign direct investment
and foreign ownership on firm markups. Overall, the findings
show that increases in the presence of foreign firms in a
given industry are associated with decreases in markups in
that industry, despite foreign firms individually charging
higher markups on average than their domestic competitors.
The findings further show that while the markups of both
foreign- and domestic-owned private firms tend to decrease
with greater foreign direct investment, state-owned
enterprises may be relatively insulated from foreign direct
investment driven competitive pressures. These results are
robust to the inclusion or exclusion of potential outliers
and the potential non-random selection of firms acquired by
foreign investors. |
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