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Import competition from and outsourcing to China: a curse or blessing for firms?

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  • Mion, Giordano
  • Zhu, Linke

Abstract

We use Belgian manufacturing firm-level data over the period 1996-2007 to analyze the impact of imports from different origins on firm growth, exit, and skill upgrading. For this purpose we use both industry-level and firm-level imports by country of origin and distinguish between firm-level outsourcing of final versus intermediate goods. Results indicate that China is different from both other low-wage and OECD countries. Industry-level import competition and firm-level outsourcing to China reduce firm employment growth and induce skill upgrading. In contrast, industry-level imports have no effect on Belgian firm survival, while firm-level outsourcing of finished goods to China even increased firm's probability of survival. In terms of skill upgrading, the effect of Chinese imports is large. Import competition from China accounts for 42% (20%) of the within firm increase in the share of skilled workers (non-production workers) in Belgian manufacturing over the period of our analysis, but these effects, as well as the employment reducing effect, remain mainly in low-tech industries. Firm-level outsourcing to China further accounts for a small but significant increase in the share of non-production workers. This change in employment structure is in line with predictions of recent model of trade-induced technological change and offshoring.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8188.

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Date of creation: Jan 2011
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Handle: RePEc:cpr:ceprdp:8188

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Keywords: China; import competition; outsourcing; skill upgrading; technological change;

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Cited by:
  1. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
  2. Franco Amatori & Matteo Bugamelli & Andrea Colli, 2011. "Italian Firms in History: Size, Technology and Entrepreneurship," Quaderni di storia economica (Economic History Working Papers) 13, Bank of Italy, Economic Research and International Relations Area.
  3. MARTIN, Julien & MAYNERIS , Florian & ,, 2013. "High-end variety exporters defying distance: micro facts and macroeconomic implications," CORE Discussion Papers 2013061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Julien Martin & Isabelle Méjean, 2012. "Low-Wage Countries’ Competition, Reallocation Across Firms and the Quality Content of Exports," Working Papers 2012-04, CEPII research center.

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