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Trade liberalization in textiles: Policy effects in an import-competing industry

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  • Conway, Patrick
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    Abstract

    I trace the dynamic impact of removal of textile quotas in the US on output, employment and plant closure in that industry. A dynamic theoretical model of firm-level decision-making is estimated with US Census manufacturing data and with industry-level demand-side data. Simulations performed with the estimated model provide a decomposition of the historical record into parts attributable to import competition, to technological progress, and to a secular real-wage increase. Plant closure and a fall in domestic prices are largely associated with technological progress, while downsizing, layoffs and reduction in domestic market share are associated with trade liberalization. The market-clearing domestic price of textiles is identified as a crucial channel in transmitting technology or import price shocks to layoffs and plant closure.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Policy Modeling.

    Volume (Year): 31 (2009)
    Issue (Month): 5 (September)
    Pages: 664-680

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    Handle: RePEc:eee:jpolmo:v:31:y:2009:i:5:p:664-680

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    Web page: http://www.elsevier.com/locate/inca/505735

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    Keywords: Plant closure Downsizing Layoffs Import competition Technological progress;

    References

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    1. Field, Alfred J. & Wongwatanasin, Umaporn, 2007. "Tax policies' impact on output, trade and income in Thailand," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 361-380.
    2. James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
    3. Cororaton, Caesar B. & Cockburn, John, 2007. "Trade reform and poverty--Lessons from the Philippines: A CGE-microsimulation analysis," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 141-163.
    4. Robert Baldwin & Frédéric Robert-Nicoud, 2006. "Trade and growth with heterogeneous firms," LSE Research Online Documents on Economics 19856, London School of Economics and Political Science, LSE Library.
    5. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
    6. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    7. Katherine Baicker & Marit M. Rehavi, 2004. "Policy Watch: Trade Adjustment Assistance," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 239-255, Spring.
    8. Fugazza, Marco & Maur, Jean-Christophe, 2008. "Non-tariff barriers in CGE models: How useful for policy?," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 475-490.
    9. Dean, Judith M, 1990. "The Effects of the U.S. MFA on Small Exporters," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 63-69, February.
    10. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-87, May.
    11. Dean, Judith M, 1995. "Market Disruption and the Incidence of VERs under the MFA," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 383-88, May.
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