International trade and retail market performance and structure: Theory and empirical evidence

We use Danish microdata for the period 1999 to 2008 to examine how greater consumer goods imports affect retail market performance and structure. Based on a propensity score matching approach, we estimate that retailers that start to import have 8% greater sales, 6% greater profits, and 2% greater markups in the year of import initiation compared to non-importing retailers. These differences are quite persistent. For instance, we estimate that cumulative sales of import starters are up to 30% higher on average after three years than for comparable non-importers. We also find that imports are associated with a higher exit probability of small retailers and greater local retail market concentration. We argue that the observed adjustments may imply additional gains from trade absent from models lacking a distribution sector.