infonet-economy

This paper studies the impact of trade policy on industry concentration. Based on the Swiss Business Census, concentration levels for all four-digit manufacturing industries in Switzerland are calculated. Then the effect of a bilateral reduction in technical barriers to trade with the European Union is estimated. Adopting a difference-in-differences approach, it turns out that concentration in affected industries with low R&D intensity increased significantly following the policy change. This supports the notion that fewer firms are able to survive as the toughness of price competition increases. The effect on industries with high R&D intensity is found to be insignificant.