This paper tests the pro-competitive effect of trade in the product and labour markets of UK manufacturing sectors between 1988 and 2003 using a two-stage estimation procedure. In the first stage, we use data on 9820 firms from twenty manufacturing sectors to simultaneously estimate mark-up and workers' bargaining power parameters according to sector, firm size and period. We find a significant drop in both the mark-up and the workers' bargaining power in the mid-nineties. In the second stage, we relate our parameters of interest to trade variables. Our results show that imports from developed countries have significantly contributed to the decrease in both mark-ups and workers' bargaining power.JEL classification : C23, F16, J51, L13.

Glenn Rayp and two anonymous referees for their very helpful comments.

There is widespread evidence that a better access to markets contributes to raising income levels. However, no quantification of the impact of distance to markets has been made on the basis of a sample restricted to advancedand therefore more homogeneouscountries. This paper applies the framework developed by Redding and Venables ( 2004) on a panel data covering 21 OECD countries over 1970-2004, and shows that, relative to the average OECD country, the cost of remoteness for countries such as Australia and New Zealand could be as high as 10% of GDP. Conversely, the benefit for centrally-located countries like Belgium and the Netherlands could be around 6-7%. Second, the paper explains why the key estimated parameter in the Redding-Venables model is biased upwards in cross-section samples that mix both developing and developed countries, because of the inability to adequately control for heterogeneity in technology levels across countries. The paper also provides a detailed discussion of the links between the -death-of-distance‖ hypothesis, the evolution of transport costs and that of the elasticity of trade to distance.

Résumé Cette étude a pour but d'estimer l'évolution des markups de treize pays de l'OCDE au cours des