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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. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," CEP Discussion Papers dp0584, Centre for Economic Performance, LSE.
  2. Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-33, C.V. Starr Center for Applied Economics, New York University.
  3. Rodrik, Dani, 2006. "What's So Special About China's Exports?," CEPR Discussion Papers 5484, C.E.P.R. Discussion Papers.
  4. 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.
  5. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2006. "The impact of trade with China and India on Argentina’s manufacturing employment," MPRA Paper 538, University Library of Munich, Germany.
  6. Dani Rodrik, 2006. "What’s So Special about China’s Exports?," Working Papers id:410, eSocialSciences.
  7. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
  8. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(4), pages 657-74, August.
  9. Roberto Álvarez & Sebastián Claro, 2006. "The china price: evidence and some implications," Estudios de Economia, University of Chile, Department of Economics, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 117-140, December.
  10. 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.
  11. 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.
  12. Lopez-Cordova, J. Ernesto & Micco, Alejandro & Molina, Danielken, 2008. "How sensitive are Latin American exports to Chinese competition in the U.S. market ?," Policy Research Working Paper Series 4497, The World Bank.
  13. Bronwyn H. Hall, 1986. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
  14. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  15. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  16. 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.
  17. Andrew B. Bernard & J. Bradford Jensen, 2001. "Why Some Firms Export," NBER Working Papers 8349, National Bureau of Economic Research, Inc.
  18. 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.
  19. 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.
  20. 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.
  21. 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.
  22. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 646-677, May.
  23. 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.
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Citations

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Cited by:
  1. 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).
  2. 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.
  3. Roberto Álvarez & Luis Opazo, 2008. "Chinese Penetration and Importer Country Wages: Microevidence From Chile," Working Papers Central Bank of Chile, Central Bank of Chile 473, Central Bank of Chile.
  4. Roberto Álvarez & Sebastián Claro, 2006. "The china price: evidence and some implications," Estudios de Economia, University of Chile, Department of Economics, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 117-140, December.
  5. Roberto Álvarez & Sebastián Claro, 2007. "On the Sources of China’s Export Growth," Working Papers Central Bank of Chile, Central Bank of Chile 426, Central Bank of Chile.
  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).

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