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

  • Stefano Federico

    ()

    (Bank of Italy)

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.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2012/2012-0879/en_tema_879.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 879.

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Date of creation: Sep 2012
Handle: RePEc:bdi:wptemi:td_879_12
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