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David Versus Goliath: The Impact of Chinese Competition on Developing Countries

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  • Roberto Álvarez;
  • Sebastián Claro

Abstract

We use detailed Chilean plant-level data from 1990 to 2000 to study the impact of Chinese import competition in manufacturing industries. We study whether China’s imports have been associated with a downsizing of manufacturing plants or whether firms have escaped Chinese competition through changes in output mix, productivity catch-up or increased exports. Our results show that imports from China have negatively affected employment growth on surviving plants and increased the probability of exit. In contrast to previous evidence for the United States, we do not find evidence that manufacturing plants have adjusted by producing more sophisticated goods or by exporting.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 478.

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Date of creation: Aug 2008
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Handle: RePEc:chb:bcchwp:478

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  1. Jorge Blázquez-Lidoy & Javier Rodríguez & Javier Santiso, 2006. "Angel or Devil? China's Trade Impact on Latin American Emerging Markets," OECD Development Centre Working Papers 252, OECD Publishing.
  2. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
  3. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
  4. MacDonald, James M, 1994. "Does Import Competition Force Efficient Production?," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 721-27, November.
  5. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2007. "The impact of trade with China and India on Argentina's manufacturing employment," Policy Research Working Paper Series 4153, The World Bank.
  6. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  7. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR & CES & MSH, vol. 23, pages 5-49, 01.
  8. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  9. Ernesto Lopez-Cordova & Alejandro Micco & Danielken Molina, 2008. "How Sensitive are Latin American Exports to Chinese Competition in the U.S. Market," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  10. J. Bradford Jensen & Andrew Bernard & Peter Schott, 2005. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers 05-19, Center for Economic Studies, U.S. Census Bureau.
  11. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
  12. McPherson, Michael A., 1996. "Growth of micro and small enterprises in southern Africa," Journal of Development Economics, Elsevier, vol. 48(2), pages 253-277, March.
  13. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
  14. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August.
  15. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  16. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  17. Rodrik, Dani, 2006. "What's So Special about China's Exports?," Working Paper Series rwp06-001, Harvard University, John F. Kennedy School of Government.
  18. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
  19. Jen Baggs, 2005. "Firm survival and exit in response to trade liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1364-1383, November.
  20. Roberto Álvarez & Sebastián Claro, 2006. "The china price: evidence and some implications," Estudios de Economia, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 117-140, December.
  21. Sleuwaegen, Leo & Goedhuys, Micheline, 2002. "Growth of firms in developing countries, evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 68(1), pages 117-135, June.
  22. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
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Citations

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Cited by:
  1. Roberto Álvarez & Sebastián Claro, 2007. "On the Sources of China’s Export Growth," Working Papers Central Bank of Chile 426, Central Bank of Chile.
  2. Roberto Álvarez & Sebastián Claro, 2006. "The china price: evidence and some implications," Estudios de Economia, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 117-140, December.
  3. Dilip K. Das, 2008. "A Chinese renaissance in an unremittingly integrating global economy," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 9(1), pages 39-46, 04.
  4. ITO Koji, 2013. "Impact of Growing Imports: A comparison of international and domestic firms in the Japanese manufacturing industry (Japanese)," Discussion Papers (Japanese) 13034, Research Institute of Economy, Trade and Industry (RIETI).
  5. 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).
  6. Roberto Álvarez & Luis Opazo, 2008. "Chinese Penetration and Importer Country Wages: Microevidence From Chile," Working Papers Central Bank of Chile 473, Central Bank of Chile.

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