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Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply

Author

Listed:
  • Philippe Aghion
  • Antonin Bergeaud
  • Matthieu Lequien
  • Marc J. Melitz
  • Thomas Zuber

Abstract

We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated in low-productivity firms. On the other hand, the impact of the input supply shock is reversed.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc J. Melitz & Thomas Zuber, 2024. "Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 16(2), pages 249-269, May.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:2:p:249-69
    DOI: 10.1257/pol.20210753
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    Cited by:

    1. Ito, Keiko & Endoh, Masahiro & Jinji, Naoto & Matsuura, Toshiyuki & Okubo, Toshihiro & Sasahara, Akira, 2025. "Margins, concentration, and the performance of firms in international trade: Evidence from Japanese customs data," Journal of the Japanese and International Economies, Elsevier, vol. 75(C).
    2. Matano, Alessia & Naticchioni, Paolo, 2025. "China's import competition, innovation strategies, and the role of unions," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 423-433.
    3. Hiroaki MORI & Kiho MUROGA & Akira SASAHARA, 2025. "Gender-specific Exposure to Trade, Labor Market Adjustments, and the Family," Discussion papers 25031, Research Institute of Economy, Trade and Industry (RIETI).
    4. Helpman, Elhanan, 2024. "Foreign competition and innovation," Journal of International Economics, Elsevier, vol. 152(C).
    5. Gnangnon, Sèna Kimm, 2024. "Trade Policy Space, Aid for Trade and, Intra-African and External African Manufactured Exports," International Economics, Elsevier, vol. 180(C).
    6. Dongxue Wang & Yugang He, 2025. "Navigating Structural Shocks: Bayesian Dynamic Stochastic General Equilibrium Approaches to Forecasting Macroeconomic Stability," Mathematics, MDPI, vol. 13(14), pages 1-25, July.
    7. Matano, Alessia & Naticchioni, Paolo, 2025. "China’s Import Competition, Innovation and the Role of Unions," IZA Discussion Papers 17764, IZA Network @ LISER.
    8. Hu, Xiaotian & Guo, Yibei & Dong, Baomin, 2025. "Leveling the playing field: How intellectual property protection countervails foreign quality shocks," China Economic Review, Elsevier, vol. 91(C).
    9. Andrew Greenland & James Lake & John Lopresti, 2024. "US Inequality in the 1980s: The Tokyo Round Trade Liberalization and the Swiss Formula," CESifo Working Paper Series 10983, CESifo.
    10. Hoyos, Mateo & Coronado, José Alejandro & Martins, Guilherme Klein, 2024. "Local and Spillover Effects of Trade on Structural Transformation: Evidence from Brazil," SocArXiv rfqvt, Center for Open Science.
    11. Choi, Jaerim & Hyun, Jay & Kim, Gueyon & Park, Ziho, 2025. "The cleanup of US manufacturing through pollution offshoring," Journal of International Economics, Elsevier, vol. 154(C).
    12. Marina Ngoma Mavungu, 2025. "Chinese Imports and Industrialization in Africa : Evidence from Ethiopia," Policy Research Working Paper Series 11118, The World Bank.
    13. repec:osf:socarx:rfqvt_v1 is not listed on IDEAS
    14. repec:ten:wpaper:2024-02 is not listed on IDEAS
    15. KUMANOMIDO, Hiroshi, 2026. "Exchange Rate Appreciation and Structural Adjustment : Evidence from the Plaza Accord," TDB-CAREE Discussion Paper Series E-2025-04, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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