Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants

Abstract

This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports originate rather than their overall level. Results demonstrate that plant survival as well as output and employment growth are negatively associated with the share of industry imports sourced from the world 's lowest-wage countries. Within industries, activity is reallocated towards capital-intensive plants. Plants are also more likely to alter their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants altering their product mix switch to industries that are more capital and skill-intensive.JEL classification: F11, F14 , L25, L60

Trade openness, real exchange rates and job reallocation: evidence from Belgium

“…While this outcome in the model is just a result of idiosyncratic shocks, a recent stream of literature on heterogeneous firms has identified a number of factors which can systematically determine it. For instance, different firms may display diversified reactions to international trade shocks, depending upon heterogeneous productivity levels (Melitz 2003;Bernard et al 2003), capital intensity and product-mix (Bernard et al 2006;Khandelwal 2010). Moreover, firms within the same industry are likely to face heterogeneous levels of trade exposure, as documented, among others, by Bernard et al (2007a), Mayer and Ottaviano (2007) and Moser et al (2010).…”

Employment and Exchange Rates: The Role of Openness and Technology

“…3). Data on employment comes from the "Quadros de Pessoal" dataset provided by the Portuguese Ministry of Labour and Social Solidarity (Portugal, MSSE, 1988-2006. This dataset is based on a compulsory survey that matches all firms and establishments with at least one employee with their workers.…”

“…1 Skill-biased technological change -see, for example, Bound and Johnson (1992) or Machin and Van Reenen (1998) -and globalization -see, for example, Wood (1994, 1998 -have been the leading explanations for the observed decline in manufacturing employment and, in particular, for the decrease in the demand for unskilled relative to skilled workers. Analyses of the effect on manufacturing of the reduction in trade barriers in recent years suggest that competition from emerging countries, namely China and India, has had a negative impact on manufacturing employment in developed countries -see, for example, Bernard et al (2006). 2 Another strand of the literature has been focusing on the impact of movements in real exchange rates on manufacturing labour markets.…”

US policy spillover(?) – China’s accession to the WTO and rising exports to the EU

“…The sizable contribution of processing trade to China's overall export growth (Amiti and Freund, 2010), and the differential exporting behavior of private domestic and foreign-invested enterprises in China (Manova and Zhang, 2009), justify speculations that export market entry of these firms follows different rules than those derived from firm-level studies in high-income regions. 2 For instance, firms in emerging 1 See, for instance, Bernard et al (2006); Bloom et al (2011); Autor et al (2013Autor et al ( , 2014; Dauth et al (2014); Utar (2014Utar ( , 2015 for the most recent contributions.…”