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The Age of the Dragon: The Effect of Imports from China on Firm‐Level Prices

Listed author(s):
  • MATTEO BUGAMELLI
  • SILVIA FABIANI
  • ENRICO SETTE

We analyze the impact of increased import penetration from China on the dynamics of firm‐level output prices in Italy. Accounting for potential endogeneity biases we find a significant and negative causal relationship: a 0.1 percentage point higher Chinese import penetration restrains price growth by 0.17 percentage points per year. This relationship reflects a procompetitive effect induced by cheaper imports, and, thanks to the firm‐level dimension of our data, we show that it is driven by low‐productivity firms within less skill‐intensive sectors. Finally, we show that Chinese import competition also had a dampening effect on Italian overall inflation.

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File URL: http://hdl.handle.net/10.1111/jmcb.12238
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 47 (2015)
Issue (Month): 6 (09)
Pages: 1091-1118

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Handle: RePEc:wly:jmoncb:v:47:y:2015:i:6:p:1091-1118
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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