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Industry dynamics and competition from low-wage countries: evidence on Italy

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  • Stefano Federico

    ()
    (Bank of Italy)

Abstract

This paper analyses the effect of competition from low-wage countries on domestic activity, using data on 230 Italian manufacturing sectors between 1995 and 2007. We find that low-wage import penetration is negatively related to employment and other measures of activity. The effect is significantly lower in more skill, capital and R&D-intensive sectors and in more vertically differentiated sectors. There is also evidence of significant effects of low-wage competition through inter-industry linkages: employment is negatively related to low-wage import penetration in downstream sectors but positively related to low-wage import penetration in upstream sectors.

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File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td12/td879_12/en_td879/en_tema_879.pdf
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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 879.

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Date of creation: Sep 2012
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Handle: RePEc:bdi:wptemi:td_879_12

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Keywords: import penetration; low-wage country competition; factor proportions; inter-industry linkages.;

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Cited by:
  1. Alessia LO TURCO & Daniela MAGGIONI, 2011. "On the Role of Imports in Enhancing Manufacturing Exports," Working Papers 363, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Anna Maria MAYDA & NAKANE Masato & STEINBERG, Chad & YAMADA Hiroyuki, 2012. "Exposure to Low-wage Country Imports and the Growth of Japanese Manufacturing Plants," Discussion papers 12038, Research Institute of Economy, Trade and Industry (RIETI).
  3. Matteo Bugamelli & Silvia Fabiani & Enrico Sette, . "The age of the dragon: Chinese competition and the pricing behavior of the Italian firms," Working Papers 4, Department of the Treasury, Ministry of the Economy and of Finance.

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