by IMF and World Bank and were thus less subject to political economy concerns than the 1995 tariff levels. Topalova and Khandelwal (2011) describe a similar case in India, where trade liberalization was set as part of IMF conditions without political economy influences. Additionally, from the trade liberalization episodes, the most protected sectors are likely to see the most reductions in tariff rates. Hence, using the initial levels of tariffs allow changes in tariff rates due to WTO to be captured.

Two issues remain a threat to the identification strategy of the quasi-experimental methodology. First, when trade policy is anticipated by firms they can change their behavior in expectation of the new trade regime. Failure to account for anticipation would undermine the causal effect between applied trade policy and the outcome variable. This anticipation threat further supports the choice of using the 1991 tariffs level instead of the 1995 level, given that the former was unanticipated by firms. A formal test of the anticipation threat to the research design is conducted in subsection 5.3, where the interaction of 1991 tariffs with those a year before WTO accession is examined. If the coefficient of this interaction term is significant, then the identification strategy would suffer from anticipation effects. As a preview of the results in subsection 5.3, the research design used in this article was found not to suffer from anticipation effects.

Second, trade policy uncertainty can undermine the estimation of the effect of trade openness on a firm’s market power. Trade policy uncertainty could be due to fear that the government may hike tariffs in the future as a response to either revenue reductions or political economy pressures from “powerful” firms. This situation is particularly relevant in the Ghanaian context.<sup>12</sup> One way to eliminate or reduce trade uncertainty is by committing countries to tariff bounds (Handley, 2014). The introduction of bound tariffs by WTO specifically reduced trade uncertainty for participating countries (Handley, 2014). To control for trade uncertainty in the estimation equation, a dummy variable _Post_ 1995 is defined, which equals 1 for the post-WTO period, and it is interacted with the initial tariff level. Therefore, the identification equation for the quasi-experimental methodology is where the dependent variable is a measure of market power of firm _i_ in three-digit sector _j_ at time _t_ . This article distinguishes between two sources of market power: the product market and the labor market. In the product market, a firm’s market power is measured by its price-cost margin on materials, that is, _μ_<sup>_m_</sup> _it_<sup>.Marketpowerinthelabormarketis</sup> measured by the degree of monopsony power, that is, _γit_ . In equation (10), _τij_ 1991 is the tariff rate faced by firm _i_ in three-digit sector _j_ in 1991;<sup>13</sup> _Post_ 1995 takes value 1 from year 1996 onward and 0 otherwise; **X**<sup>_′_</sup> _it_ is a vector comprising the firm characteristics of predicted productivity, skill ratio, and firm size; _δt_ represents the year fixed effects; _αi_ is an unobserved firm-specific component; and _εijt_ is an idiosyncratic error.

The coefficient _λ_ 1 captures differences in market power before and after 1995. It also 17