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Import competition, dynamic resource allocation and productivity dispersion: micro-level evidence from China

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  • Sai Ding
  • Wei Jiang
  • Puyang Sun

Abstract

Can trade liberalization shape sector dynamics by inducing reallocation of resources towards more efficient use? This paper explores whether and how import competition affects productivity dispersion within 425 four-digit manufacturing industries in China. Using a number of comprehensive micro-level datasets over the period of 2000–-2006, we find that import penetration reduces the productivity dispersion in general and the main channel is through the competition-induced dynamic resource allocation within industries by driving the least efficient firms out of the market. The trade-induced productivity truncation is more evident for imports under the ordinary trade regime and for final imported goods and intermediate goods imported by the same industries. The results are robust to various model specifications and estimation methods.

Suggested Citation

  • Sai Ding & Wei Jiang & Puyang Sun, 2016. "Import competition, dynamic resource allocation and productivity dispersion: micro-level evidence from China," Oxford Economic Papers, Oxford University Press, vol. 68(4), pages 994-1015.
    • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:4:p:994-1015.
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    File URL: http://hdl.handle.net/10.1093/oep/gpw036
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    Citations

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    Cited by:

    1. Manova, Kalina & Berthou, Antoine & Sandoz, Charlotte & Chung, John Jong-Hyun, 2019. "Trade, Productivity and (Mis)allocation," CEPR Discussion Papers 14203, C.E.P.R. Discussion Papers.
    2. Jiangteng Zhou, 2023. "The impacts of highways on firm size distribution: Evidence from China," Growth and Change, Wiley Blackwell, vol. 54(2), pages 482-506, June.
    3. Kim, Incheol & Lee, Suin & Sharma, Bina, 2023. "Competition law reform and firm performance: Evidence from developing countries," Emerging Markets Review, Elsevier, vol. 56(C).
    4. R. Rijesh, 2021. "Liberalization, Import of Capital Goods, and Industrial Exports: Evidence from Indian Manufacturing Sectors," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(1), pages 81-103, January.
    5. R. Rijesh, 2019. "International Trade and Productivity Growth in Indian Industry: Evidence from the Organized Manufacturing Sector," Journal of South Asian Development, , vol. 14(1), pages 1-39, April.
    6. Ernest Kay Bakpa & Hu Xuhua & Abigail Konadu Aboagye, 2021. "Ghana’s economic growth: Directing our focus on the contributing influences of innovation activities and trade," Growth and Change, Wiley Blackwell, vol. 52(4), pages 2213-2237, December.
    7. Gullstrand, Joakim & Knutsson, Polina, 2019. "The Spatial Dimension of Import Competition," Working Papers 2019:13, Lund University, Department of Economics.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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