The effect of foreign trade on mark-up: An application for Turkish manufacturing industry

This study examines the impacts of foreign trade on mark-ups for 189 sub-sectors of Turkish manufacturing industry by using panel data analysis during the 2004-2015 period. Another aim of the study is to estimate the effects of the increase in imports and exports on mark-ups by distinguishing the competitive and non-competitive sectors The results show that there is a positive relationship between mark-up and import penetration rate in total and competitive manufacturing sectors, and a negative relationship between mark-ups and export intensity. Therefore, our study shows that that foreign trade variables affect mark-up through different channels in competitive and non-competitive sectors. Our study also indicates that although there is a positive relationship between mark-up and import penetration rate in sectors with low competitiveness, there is no statistically significant relationship between export intensity and mark-ups. Additionally, sectoral real exchange rate, concentration ratio and total employment variables also have a positive effect on mark-ups in all manufacturing industry sub-sectors and in competitive and non-competitive sectors.