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Industry dynamics and competition from low-wage countries: evidence on Italy

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  • Stefano Federico

    (Bank of Italy)

Abstract

This paper analyses the effect of competition from low-wage countries on domestic activity, using data on 230 Italian manufacturing sectors between 1995 and 2007. We find that low-wage import penetration is negatively related to employment and other measures of activity. The effect is significantly lower in more skill, capital and R&D-intensive sectors and in more vertically differentiated sectors. There is also evidence of significant effects of low-wage competition through inter-industry linkages: employment is negatively related to low-wage import penetration in downstream sectors but positively related to low-wage import penetration in upstream sectors.

Suggested Citation

  • Stefano Federico, 2012. "Industry dynamics and competition from low-wage countries: evidence on Italy," Temi di discussione (Economic working papers) 879, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_879_12
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    More about this item

    Keywords

    import penetration; low-wage country competition; factor proportions; inter-industry linkages;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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