This paper identifies the effect of trade policy on market power through new data and a new identification strategy. It uses a large data set containing export values and quantities by product and destination for all exporting firms in 12 developing and emerging countries over several years, merged with destination-product-specific information on tariffs and non-tariff barriers. Market power is identified by observing how exporting firms price discriminate across markets in reaction to variations in bilateral exchange rates.Pricing-to-market is prevalent in all regions of the sample, even among small firms, although it is increasing in firm size, in accordance with theory. More importantly, the effect of non-tariff measures is not isomorphic to that of tariffs: the observed pricing-to-market behavior suggests that, although tariffs reduce the market power of foreign firms through classic rent-shifting effects, non-tariff measures alter market structure and reinforce the market power of non-exiting firms, domestic and foreign ones alike.We derive two main testable predictions, respectively related to non-tariff measures and to tariffs. Specifically, we show that NTMs applied in a non-discriminatory fashion -that is, in compliance with the WTO's "national treatment" clause, whereby imported and domestically-produced products must be treated alike -raise market power and PTM for incumbents if they induce the exit of smaller firms, e.g. through higher fixed costs. 4 Import tariffs, on the other hand, decrease the sales of incumbents but also induce the exit of small firms, leading to an ambiguous impact on market power. However, given their discriminatory nature, tariffs are more likely to displace foreign firms in favor of domestic ones, implying that the intensive margin effect dominates and in net tariffs reduce the market shares of exporters and thus their incentive to engage in PTM. 5 We then test these predictions using a large multi-country firm-level data set obtained from customs administrations in twelve developing countries, ranging from low income to middle income. We combine the firm-level data with destination-product specific data on bilateral applied tariffs as well as non-tariff measures. The latter cover a wide range of measures ranging from sanitary and phytosanitary measures to technical barriers to trade. Pooling together firm-level data from several developing countries allows us to provide evidence on the extent of exchange rate pass-through for countries and regions that have received little attention so far. It also allows us to explore more systematically the impact of trade policy on competition and market power using a sample of countries facing different trade policy arrangements, in particular preferential tariffs. Importantly, the high dimensionality of the data enables us to account for unobserved heterogeneity and for a large set of confounding influences at the level of both the firm and the market using a powerful array of fixed effects. The fact that our unit of observation is the ...

This article identifies the effect of trade policy on market power through new data and a new identification strategy. We identify market power by observing how exporting firms price discriminate across markets following variations in bilateral exchange rates. Pricing‐to‐market is prevalent in all countries in our sample, even among small firms, although it is increasing in firm size. More importantly, we find that the effect of nontariff measures (NTMs) is not isomorphic to that of tariffs. Whereas tariffs reduce the market power of foreign firms through rent‐shifting effects, NTMs reinforce the market power of nonexiting firms, domestic and foreign alike.