Trade as an engine of creative destruction: Mexican experience with Chinese competition

Iacovone, Leonardo; Rauch, Ferdinand; Winters, L. Alan

doi:10.1016/j.jinteco.2012.09.002

Cited by 134 publications

(139 citation statements)

References 30 publications

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“…31 Similar effects are observed for other countries: Growing Chinese import competition increases plant exit and reduces firm growth in Mexico (Iacovone, Rauch and Winters, 2013;Utar and Torres-Ruiz, 2013) and reduces employment growth in Belgian firms (Mion and Zhu, 2013), Danish firms (Utar, 2014), and in a panel of firms from twelve European countries (Bloom, Draca, and Van Reenen, 2015).…”

Section: Industry Adjustment To Import Competitionmentioning

confidence: 70%

The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade

2016

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China's emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.

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Section: Industry Adjustment To Import Competitionmentioning

confidence: 70%

The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade

2016

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“…This includes papers that have studied the impact of Chinese import competition on economic variables such as manufacturing employment (Pierce andSchott 2012, Autor et al 2013), worker earnings (Pessoa 2014), skill upgrading Woo 2005, Mion andZhu 2013), firm and product selection (Iacovone et al 2013) and innovation (Bloom et al 2011). There are a much smaller number of papers which, like this paper, also take account of demand-side effects.…”

Section: Introductionmentioning

confidence: 99%

Winners and losers from a commodities-for-manufactures trade boom

Costa¹,

Garred

Pessoa

2016

Journal of International Economics

134

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A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010, and greater rises in local wage inequality. However, in locations benefiting from rising Chinese demand, we observe higher wage growth, lower takeup of cash transfers and positive effects on job quality.

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“…Iacovone et al . () explore the effect of surge in import competition from China on Mexican manufacturing firms, and find that this shock causes a significant market share reallocation within firms and between firms. Mion and Zhu () find evidence that import competition from China reduces firms’ employment growth and induces substantial skill upgrading in low‐tech manufacturing industries in Belgium.…”

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confidence: 99%

The Effect of Import Competition on Firm Productivity and Innovation: Does the Distance to Technology Frontier Matter?

2015

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How does foreign competition affect growth and innovation in China? Using our unique measures of proximity of Chinese firms and industries to the world technology frontier, we find that despite vast sectoral heterogeneity, Chinese manufacturing industries have undergone rapid technological upgrading over the period of 2000-06. The distance to the world production frontier of firms and industries also play a significant role in shaping the nexus between the competition pressure from foreign imports and domestic firms' growth and innovation behavior. Our results support the theoretical predictions of Aghion et al. (2005) that import competition stimulates domestic firms' productivity growth and R&D expenditure if firms and their industries are close to the world frontier, but discourages such incentives for laggard firms and industries. The two forces highlighted by the model operate for imports under the ordinary-trade regime, for collective and private firms, and for imports originated from high-income countries. Our findings are robust after controlling for the influence of foreign investment, the reverse causality of regressors and the short-term business cycle fluctuations. JEL ClassificationF14; L1; D24; O12

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Trade as an engine of creative destruction: Mexican experience with Chinese competition

Cited by 134 publications

References 30 publications

The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade

The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade

Winners and losers from a commodities-for-manufactures trade boom

The Effect of Import Competition on Firm Productivity and Innovation: Does the Distance to Technology Frontier Matter?

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