As economies now look for paths to recovery from the COVID-19 crisis, new evidence reaffirms that policies for more open and trade-integrated economies could significantly benefit domestic competition and ultimately may help lower costs for consumers in emerging and developing economies.

A recent Working Paper, building on the Regional Economic Outlook chapter on competition, competitiveness and growth in Sub-Saharan Africa, examines the effect of trade liberalization using a large firm-level dataset covering about 400,000 firms in 83 emerging and developing economies from 2000 to 2017. The study also focuses on 29 nations in sub-Saharan Africa where greater trade integration led to significantly lower markups. Markups show the ability of firms to charge consumers above their costs and are indicators of market power. The more the competition, the less the market power and the lower the markups.

Source: IMF Blog