Made in China: Export competition and structural changes in the OECD countries
AbstractThis paper assesses the existence and extent of transition cost for the OECD economies associated with the increasing Chinese competition in the export markets. We find that intensified Chinese competition is an important factor in explaining structural changes not only within the manufacturing sector but also of the economies as a whole. In our empirical analysis which is guided by a simple extension of the Melitz Model we employ panel data at multiple levels of aggregation. The data reveal considerable adverse effects on export volume and industry-specific output in OECD countries as a result of increased Chinese competition. These distortions originating from the export market also affect structural variables within the manufacturing industries. Even at a regional level, changes in socioeconomic indicators can be associated with intensified Chinese export competition. Within the framework of our theoretical model, the mechanisms behind these observations are the following: The increased Chinese competition leads to a decline in exports and overall output, implying a decrease in average productivity and wages. This induces the reallocation of labor to the low-wage service sector, which in turn results in a reduction of average household income.
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Bibliographic InfoPaper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2012/09.
Date of creation: 2012
Date of revision:
China; Export Competition; Deindustrialization;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-13 (All new papers)
- NEP-CNA-2012-06-13 (China)
- NEP-COM-2012-06-13 (Industrial Competition)
- NEP-INT-2012-06-13 (International Trade)
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