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Trade liberalization in textiles: Policy effects in an import-competing industry

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  • Conway, Patrick

Abstract

I trace the dynamic impact of removal of textile quotas in the US on output, employment and plant closure in that industry. A dynamic theoretical model of firm-level decision-making is estimated with US Census manufacturing data and with industry-level demand-side data. Simulations performed with the estimated model provide a decomposition of the historical record into parts attributable to import competition, to technological progress, and to a secular real-wage increase. Plant closure and a fall in domestic prices are largely associated with technological progress, while downsizing, layoffs and reduction in domestic market share are associated with trade liberalization. The market-clearing domestic price of textiles is identified as a crucial channel in transmitting technology or import price shocks to layoffs and plant closure.

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  • Conway, Patrick, 2009. "Trade liberalization in textiles: Policy effects in an import-competing industry," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 664-680, September.
    • Handle: RePEc:eee:jpolmo:v:31:y:2009:i:5:p:664-680
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