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When the Floodgates Open: "Northern" Firms' Response to Removal of Trade Quotas on Chinese Goods

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  • Hale Utar

Abstract

Using the dismantling of the Multi-fibre Arrangement quotas on Chinese textile products in conjunction with China's accession to the World Trade Organization (WTO), within firms adjustments to intensified low-wage competition is analyzed. Employing Danish employer-employee matched data covering from 1995 to 2007, the analysis shows a significant change in the workforce composition of firms in response to heightened competition. Competition is found to negatively affect employment, value-added, and intangible assets of the Danish firms, and firms refocus away from products, where China's competitive advantage becomes higher. The results show an important role of the distributional impact of low-wage competition within firms in restructuring the industry.

Suggested Citation

  • Hale Utar, 2014. "When the Floodgates Open: "Northern" Firms' Response to Removal of Trade Quotas on Chinese Goods," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 226-250, October.
    • Handle: RePEc:aea:aejapp:v:6:y:2014:i:4:p:226-50
    Note: DOI: 10.1257/app.6.4.226
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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