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Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants

  • Andrew B. Bernard

    ()

    (Dartmouth College - Tuck School of Business)

  • J. Bradford Jensen

    ()

    (Institute for International Economics)

  • Peter K. Schott

    ()

    (Yale University, Yale School of Management)

We examine the relationship between import competition from low wage countries and the reallocation of US manufacturing from 1977 to 1997. Both employment and output growth are slower for plants that face higher levels of low wage import competition in their industry. As a result, US manufacturing is reallocated over time towards industries that are more capital and skill intensive. Differential growth is driven by a combination of increased plant failure rates and slower growth of surviving plants. Within industries, low wage import competition has the strongest effects on the least capital and skill intensive plants. Surviving plants that switch industries move into more capital and skill intensive sectors when they face low wage competition.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP03-3.

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Date of creation: May 2003
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Handle: RePEc:iie:wpaper:wp03-3
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