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Manufacturing restructuring and the role of real exchange rate shocks

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  • Ekholm, Karolina
  • Moxnes, Andreas
  • Ulltveit-Moe, Karen Helene

Abstract

Using a new and extensive micro data set we investigate the impact of a change in international competitive pressure on industrial performance and restructuring. Unlike previous studies we are able to account for the heterogeneity across firms in their exposure to foreign competition. We focus on a situation akin to a natural experiment, and examine the impact of a sharp real appreciation of the Norwegian Krone in the early 2000s on Norwegian manufacturing firms which differ substantially in their trade orientation. A change in the real exchange rate (RER) affects a firm through three different channels: (i) firm's export sales, (ii) firm's purchases of imported inputs, and (iii) import competition faced in the domestic market. Unlike previous studies, we are able to examine all three channels. Both net exporters and import-competing firms were exposed to increased competition due to the real appreciation. Both groups reacted by shedding labor, but only the first group experienced increasing labor productivity. Partly, the productivity improvements came from measured TFP gains, while capital deepening does not appear to have been affected by the shock.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 86 (2012)
Issue (Month): 1 ()
Pages: 101-117

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Handle: RePEc:eee:inecon:v:86:y:2012:i:1:p:101-117

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Productivity; Competitive pressure; Real appreciation;

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References

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Citations

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Cited by:
  1. Murphy, Gavin & Siedschlag, Iulia, 2012. "The Effect of Real Exchange Rate Changes on Labour Productivity Growth," Papers WP439, Economic and Social Research Institute (ESRI).
  2. Cebeci, Tolga & Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2012. "Exporter dynamics database," Policy Research Working Paper Series 6229, The World Bank.
  3. Nicolas Berman & Philippe Martin & Thierry Mayer, 2009. "How do Different Exporters React to Exchange Rate Changes? Theory, Empirics and Aggregate Implications," Working Papers 2009-32, CEPII research center.
  4. repec:hal:journl:hal-00975562 is not listed on IDEAS
  5. Antoine Berthou & Lionel Fontagné, 2013. "How do Multiproduct Exporters React to a Change in Trade Costs?," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00975562, HAL.

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