Measuring the intensity of competition in export markets

Abstract

This paper develops an approach to measuring the intensity of competition in international markets using readily available data on destination-specific values and quantities of exports at the seven-digit industry level. The intensity of competition a group of exporters faces in a particular export market is measured by the residual demand elasticity the group faces. This elasticity is identified by exchange rate shocks which rotate the supply relation of the source-country export group relative to competitors located in other countries. We apply this method to German exports of beer and US exports of linerboard paper. The resulting estimates of market power appear to be plausible and consistent with other indicators of competition (e.g. market shares, the number of competitors), providing support for the applicability of our framework in measuring competition in international markets. © 1999 Elsevier Science B.V.