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Trade as an Engine of Creative Destruction: Mexican Experience with Chinese Competition

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  • Leonardo Iacovone
  • Ferdinand Rauch
  • L. Alan Winters

Abstract

This paper exploits the surge in Chinese exports from 1994 to 2004 as a natural experiment to evaluate the effects of a unilateral low wage trade and competition shock to producers in Mexico. We find that this shock causes selection at both firm and product levels as its impact is highly heterogeneous both on the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, while larger plants and products exhibit an opposite response. Similar results hold both for the domestic market and for competition facing Mexican exporters in a third market (i.e. the United States).

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0999.

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Date of creation: Sep 2010
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Handle: RePEc:cep:cepdps:dp0999

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: China; Mexico; multi-product-firm; trade shock;

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References

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Citations

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Cited by:
  1. Tibor Besedeš, 2011. "The Role of NAFTA and Returns to Scale in Export Duration," CeFiG Working Papers 17, Center for Firms in the Global Economy, revised 01 Dec 2011.
  2. Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.
  3. Ashournia, Damoun & Munch, Jakob R. & Nguyen, Daniel, 2014. "The Impact of Chinese Import Penetration on Danish Firms and Workers," IZA Discussion Papers 8166, Institute for the Study of Labor (IZA).
  4. Kis-Katos, Krisztina & Sparrow, Robert, 2013. "Poverty, Labour Markets and Trade Liberalization in Indonesia," IZA Discussion Papers 7645, Institute for the Study of Labor (IZA).
  5. Majlesi, Kaveh, 2014. "Labor Market Opportunities and Women's Decision Making Power within Households," Working Papers 2014:4, Lund University, Department of Economics.
  6. 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).
  7. Francisco Costa & Jason Garred & Joao Paulo Pessoa, 2014. "Winners and Losers from a Commodities-for-Manufactures Trade Boom," CEP Discussion Papers dp1269, Centre for Economic Performance, LSE.
  8. Mauro Caselli & Arpita Chatterjee & Alan Woodland, 2014. "Multi-product exporters, variable markups and exchange rate fluctuations," Discussion Papers 2014-15, School of Economics, The University of New South Wales.

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