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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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    Cited by:

    1. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    2. Larry D. Qiu & Chaoqun Zhan, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 45-71, February.
    3. Yi Che & Yi Lu & Justin R. Pierce & Peter K. Schott & Zhigang Tao, 2016. "Does Trade Liberalization with China Influence U.S. Elections?," Finance and Economics Discussion Series 2016-039, Board of Governors of the Federal Reserve System (U.S.).
    4. Wolfgang Keller & Hale Utar, 2016. "International Trade and Job Polarization: Evidence at the Worker Level," CESifo Working Paper Series 5978, CESifo Group Munich.
    5. Italo Colantone & Kristien Coucke & Leo Sleuwaegen, 2015. "Low-cost import competition and firm exit: evidence from the EU," Industrial and Corporate Change, Oxford University Press, vol. 24(1), pages 131-161.
    6. Hale Utar, 2016. "Workers Beneath the Floodgates: Low-Wage Import Competition and Workers' Adjustment," CESifo Working Paper Series 6224, CESifo Group Munich.
    7. Jorge Luis García-Alcaraz & Aidé Aracely Maldonado-Macías & Sandra Ivette Hernández-Hernández & Juan Luis Hernández-Arellano & Julio Blanco-Fernández & Juan Carlos Sáenz Díez-Muro, 2016. "New Product Development and Innovation in the Maquiladora Industry: A Causal Model," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-18, July.
    8. repec:liu:liucej:v:13:y:2016:i:2:p:169-198 is not listed on IDEAS
    9. Sean M. Dougherty & Octavio R. Escobar, 2016. "Could Mexico become the new ‘China’? Policy drivers of competitiveness and productivity," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(2), pages 169-198, December.
    10. ANDO Mitsuyo & KIMURA Fukunari, 2017. "Job Creation and Destruction at the Levels of Intra-firm Sections, Firms, and Industries in Globalization: The case of Japanese manufacturing firms," Discussion papers 17100, Research Institute of Economy, Trade and Industry (RIETI).
    11. Kaveh Majlesi & Gaia Narciso, 2015. "International Import Competition and the Decision to Migrate: Evidence from Mexico," CReAM Discussion Paper Series 1511, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    12. Pavcnik, Nina, 2017. "The Impact of Trade on Inequality in Developing Countries," CEPR Discussion Papers 12331, C.E.P.R. Discussion Papers.
    13. Magne Mogstad & Emmanuel Dhyne & Ayumu Kikkawa & Felix Tintelnot, 2017. "Trade and Domestic Production Networks," 2017 Meeting Papers 381, Society for Economic Dynamics.
    14. Majlesi, Kaveh, 2016. "Labor market opportunities and women's decision making power within households," Journal of Development Economics, Elsevier, vol. 119(C), pages 34-47.
    15. Matteo Bugamelli & Silvia Fabiani & Enrico Sette, 2015. "The Age of the Dragon: The Effect of Imports from China on Firm‐Level Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(6), pages 1091-1118, September.
    16. Barbara Kotschwar, 2014. "China's Economic Influence in Latin America," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(2), pages 202-222, July.
    17. Caamal-Olvera, Cinthya G. & Rangel-González, Erick, 2015. "Measuring the impact of the Chinese competition on the Mexican Labor Market: 1990–2013," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 351-363.
    18. Deiana, C, 2016. "Local Labour Market Effects of Unemployment on Crime Induced by Trade Shocks," Economics Discussion Papers 16529, University of Essex, Department of Economics.
    19. repec:eee:deveco:v:132:y:2018:i:c:p:75-87 is not listed on IDEAS
    20. Nina Pavcnik, 2017. "The Impact of Trade on Inequality in Developing Countries," NBER Working Papers 23878, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    International competition; Maquiladora; China; Export processing; Plant dynamics; Industrial upgrading;

    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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