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Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply

Author

Listed:
  • Philippe Aghion

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France)

  • Antonin Bergeaud

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Matthieu Lequien

    (INSEE - Institut national de la statistique et des études économiques (INSEE))

  • Marc Melitz

    (Harvard University)

  • Thomas Zuber

    (Banque de France - Banque de France - Banque de France)

Abstract

We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated in low-productivity firms. On the other hand, the impact of the input supply shock is reversed.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc Melitz & Thomas Zuber, 2024. "Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply," PSE-Ecole d'économie de Paris (Postprint) halshs-04798529, HAL.
    • Handle: RePEc:hal:pseptp:halshs-04798529
    DOI: 10.1257/pol.20210753
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    Cited by:

    1. Helpman, Elhanan, 2024. "Foreign competition and innovation," Journal of International Economics, Elsevier, vol. 152(C).
    2. Hoyos, Mateo & Coronado, José Alejandro & Martins, Guilherme Klein, 2024. "Local and Spillover Effects of Trade on Structural Transformation: Evidence from Brazil," SocArXiv rfqvt, Center for Open Science.
    3. repec:ten:wpaper:2024-02 is not listed on IDEAS
    4. Hu, Xiaotian & Guo, Yibei & Dong, Baomin, 2025. "Leveling the playing field: How intellectual property protection countervails foreign quality shocks," China Economic Review, Elsevier, vol. 91(C).
    5. Dongxue Wang & Yugang He, 2025. "Navigating Structural Shocks: Bayesian Dynamic Stochastic General Equilibrium Approaches to Forecasting Macroeconomic Stability," Mathematics, MDPI, vol. 13(14), pages 1-25, July.
    6. Matano, Alessia & Naticchioni, Paolo, 2025. "China's import competition, innovation strategies, and the role of unions," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 423-433.
    7. repec:osf:socarx:rfqvt_v1 is not listed on IDEAS
    8. Ito, Keiko & Endoh, Masahiro & Jinji, Naoto & Matsuura, Toshiyuki & Okubo, Toshihiro & Sasahara, Akira, 2025. "Margins, concentration, and the performance of firms in international trade: Evidence from Japanese customs data," Journal of the Japanese and International Economies, Elsevier, vol. 75(C).
    9. Matano, Alessia & Naticchioni, Paolo, 2025. "China’s Import Competition, Innovation and the Role of Unions," IZA Discussion Papers 17764, Institute of Labor Economics (IZA).
    10. Andrew Greenland & James Lake & John Lopresti, 2024. "US Inequality in the 1980s: The Tokyo Round Trade Liberalization and the Swiss Formula," CESifo Working Paper Series 10983, CESifo.
    11. Choi, Jaerim & Hyun, Jay & Kim, Gueyon & Park, Ziho, 2025. "The cleanup of US manufacturing through pollution offshoring," Journal of International Economics, Elsevier, vol. 154(C).
    12. Gnangnon, Sèna Kimm, 2024. "Trade Policy Space, Aid for Trade and, Intra-African and External African Manufactured Exports," International Economics, Elsevier, vol. 180(C).
    13. Marina Ngoma Mavungu, 2025. "Chinese Imports and Industrialization in Africa : Evidence from Ethiopia," Policy Research Working Paper Series 11118, The World Bank.
    14. Hiroaki MORI & Kiho MUROGA & Akira SASAHARA, 2025. "Gender-specific Exposure to Trade, Labor Market Adjustments, and the Family," Discussion papers 25031, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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