Abstract
Abstract This article investigates the impact of Ghana’s World Trade Organization (WTO) accession on firm-level product and labor market imperfections. The article exploits a rich dataset of firm-level information to estimate markups and the degree of monopsony power enjoyed by manufacturing firms. The results indicate that price-cost margins declined while the degree of monopsony power increased in the wake of WTO accession. These diverging dynamics suggest that firms compress real wages to offset loss of market power in the product market due to increased international competition. This gives rise to an increase in the market imperfection gap, which gradually erodes the pro-competitive gains from trade. The article contributes to the literature by identifying channels through which allocative inefficiencies and misallocation can persist even after trade liberalization.
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