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Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply

Author

Listed:
  • Philippe Aghion
  • Antonin Bergeaud
  • Matthieu Lequien
  • Marc J. Melitz
  • Thomas Zuber

Abstract

We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated in low-productivity firms. On the other hand, the impact of the input supply shock is reversed.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc J. Melitz & Thomas Zuber, 2024. "Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 16(2), pages 249-269, May.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:2:p:249-69
    DOI: 10.1257/pol.20210753
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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