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International competition and industrial evolution: Evidence from the impact of Chinese competition on Mexican maquiladoras

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  • Utar, Hale
  • Ruiz, Luis B. Torres

Abstract

Effects of the competition between two South locations (Mexico and China) in a Northern market (US) are analyzed. By employing a plant-level data set that covers the universe of Mexican export processing plants (maquiladoras) from 1990 to 2006 and relying on an instrumental variable strategy that exploits exogenous intensification of Chinese imports in the world in conjunction with the WTO accession of China, the empirical analysis reveals a substantial effect of intensified Chinese competition on maquiladoras. In particular, competition from China has a negative and significant impact on employment and plant growth, both through the intensive and the extensive margin. As the negative impact is stronger on the most unskilled labor intensive sectors, it triggers significant sectoral reallocation. Suggestive evidence on industrial upgrading among maquiladoras in response to competition with China is also provided. Overall the results provide additional insight into the way low-wage competition shapes the evolution of industries.

Suggested Citation

  • Utar, Hale & Ruiz, Luis B. Torres, 2013. "International competition and industrial evolution: Evidence from the impact of Chinese competition on Mexican maquiladoras," Journal of Development Economics, Elsevier, vol. 105(C), pages 267-287.
    • Handle: RePEc:eee:deveco:v:105:y:2013:i:c:p:267-287
    DOI: 10.1016/j.jdeveco.2013.08.004
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    More about this item

    Keywords

    International competition; Maquiladora; China; Export processing; Plant dynamics; Industrial upgrading;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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