The Age of the Dragon: The Effect of Imports from China on Firm‐Level Prices

Abstract

We analyze the impact of increased import penetration from China on the dynamics of firm‐level output prices in Italy. Accounting for potential endogeneity biases we find a significant and negative causal relationship: a 0.1 percentage point higher Chinese import penetration restrains price growth by 0.17 percentage points per year. This relationship reflects a procompetitive effect induced by cheaper imports, and, thanks to the firm‐level dimension of our data, we show that it is driven by low‐productivity firms within less skill‐intensive sectors. Finally, we show that Chinese import competition also had a dampening effect on Italian overall inflation.

The effects of Chinese import penetration on firm innovation: Evidence from the Vietnamese manufacturing sector

“…In addition, the Cragg-Donald Fstatistic of excluded instruments is well above the critical values identified by Staiger and Stock (1997), showing that a weak instrument is not our concern. This result is consistent with the existing evidence in the literature, which finds that China's exports are a good instrument to predict imports (Bloom et al 2016;Bugamelli et al 2015;Edwards and Jenkins 2015), and is also in line with the theory of trade shocks from China's export boom. In the upper panel, I report the results for different measures of firm innovation exposure to increased competition from China.…”

Sovereign Debt Exposure and the Bank Lending Channel: Impact on Credit Supply and the Real Economy

“…This paper contributes to the literature on the bank lending channel (Kashyap et al 1992;Khwaja and Mian 2008;Gan 2007b;Chodorow-Reich 2014;Greenstone et al 2014;Jiménez et al 2014) by providing new 6 See Angelini et al (2014) for a discussion of the prudential treatment of sovereign securities. 7 These findings are in line with those in Duygan-Bump et al (2015), who find that workers in small firms were more likely to become unemployed during the 2007-2009 recession than comparable workers in large firms, but for firms operating in industries highly dependent on external finance. 8 evidence on the role of sovereign securities.…”

Back on Track? A Macro–Micro Narrative of Italian Exports

“…According to Bloom, Draca and Van Reenen (2015), the negative impact of import penetration from China on employment is stronger for low-tech firms, while the positive impact on innovation and TFP-growth is stronger for high-tech enterprises. For Italy, Bugamelli, Fabiani and Sette (2015) find that growing imports from China have had a sizable negative effect on the dynamics of prices charged by Italian firms and that this effect is larger, in absolute terms, for low-productive firms in low-skill sectors.…”

“…33 Several studies suggest that the "China shock" and, more generally, the increasing competition of low-wage countries did indeed have a significant impact on advanced economies (for a survey, see Autor, Dorn and Hanson, 2016). Focusing on Italy, there is evidence of an impact on sector-level productivity (Bugamelli and Rosolia, 2006;Bugamelli, Schivardi and Zizza, 2009), on firms' pricing strategies (Bugamelli, Fabiani and Sette, 2015), on output and employment in the manufacturing sector, including inter-sectoral effects via input-output linkages (Federico 2014), on exports (Giovannetti, Sanfilippo and Velucchi, 2011) and on export unit values (Giovannetti and Sanfilippo, 2016). 34 The analysis is based on more than 4,500 products defined at the HS 6-digit level.…”