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Adapting to Import Competition: Effects of Low-wage Trade on Commodity Mix in Canadian Manufacturing Plants

  • Lileeva, Alla
  • Baldwin, John R.

The paper investigates how Canadian manufacturing plants adjust to an increase in low-wage import competition by changing their commodity portfolios. At the commodity level, we distinguish between 'core' versus 'peripheral' and differentiated versus homogeneous commodities. We also account for cost and technological complementarities using input-output linkages between commodities produced by a plant. We document large commodity turnover within plants over the period from 1988 to 1996. The largest changes happened in multi-commodity plants and involved peripheral commodities. The commodities that were affected the most were those commodities that are potentially used as inputs in production of the 'core' commodity; homogeneous (rather than differentiated) commodities; and, commodities with relatively weak input complementarities with the core product. Plants experiencing large import competition shifted their output toward production of their core commodity and away from production of unrelated peripheral commodities.

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File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0027M2008054&ObjType=46&lang=en&limit=0
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Paper provided by Statistics Canada, Analytical Studies Branch in its series Economic Analysis (EA) Research Paper Series with number 2008054e.

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Date of creation: 16 May 2008
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Handle: RePEc:stc:stcp5e:2008054e
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Web page: http://www.statcan.gc.ca

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  1. John R. Baldwin & Richard E. Caves & Wulong Gu, 2005. "Responses to Trade Liberalization: Changes in Product Diversification in Foreign- and Domestic-Controlled Plants," Chapters, in: Governance, Multinationals and Growth, chapter 10 Edward Elgar.
  2. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2003. "Product Choice and Product Switching," Yale School of Management Working Papers ysm381, Yale School of Management.
  3. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  4. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
  5. Jose Campa & Linda S. Goldberg, 1997. "The evolving external orientation of manufacturing: a profile of four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-81.
  6. Aghion, Philippe & Tirole, Jean, 1995. "Some implications of growth for organizational form and ownership structure," European Economic Review, Elsevier, vol. 39(3-4), pages 440-455, April.
  7. Alla Lileeva, 2008. "Trade liberalization and productivity dynamics: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 360-390, May.
  8. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Andrew Bernard & J. Bradford Jensen & Peter Schott, 2003. "Survival of the best fit: exposure to low-wage countries and the (uneven) growth of US manufacturing plants," IFS Working Papers W03/12, Institute for Fiscal Studies.
  10. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  11. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, October.
  12. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 557-592 National Bureau of Economic Research, Inc.
  13. repec:cup:cbooks:9780521810869 is not listed on IDEAS
  14. Gu, Wulong & Caves, Richard & Baldwin, John R., 2005. "Responses to Trade Liberalization: Changes in Product Diversification in Foreign- and Domestic-controlled Plants," Economic Analysis (EA) Research Paper Series 2005031e, Statistics Canada, Analytical Studies Branch.
  15. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  16. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-Product Firms and Trade Liberalization," CEP Discussion Papers dp0769, Centre for Economic Performance, LSE.
  17. repec:hrv:faseco:4784029 is not listed on IDEAS
  18. Grossman, G.M. & Helpman, E., 1989. "Endogemour Product Cycles," Papers 10-89, Tel Aviv.
  19. Jen Baggs, 2005. "Firm survival and exit in response to trade liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1364-1383, November.
  20. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  21. Jensen, Richard & Thursby, Marie, 1986. "A strategic approach to the product life cycle," Journal of International Economics, Elsevier, vol. 21(3-4), pages 269-284, November.
  22. Aw, Bee Yan & Batra, Geeta & Roberts, Mark J., 2001. "Firm heterogeneity and export-domestic price differentials: A study of Taiwanese electronics products," Journal of International Economics, Elsevier, vol. 54(1), pages 149-169, June.
  23. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  24. Jensen, Richard & Thursby, Marie, 1987. "A Decision Theoretic Model of Innovation, Technology Transfer, and Trade," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 631-47, October.
  25. Beckstead, Desmond & Baldwin, John R. & Caves, Richard, 2002. "Changes in the Diversification of Canadian Manufacturing Firms and Plants (1973-1997): A Move to Specialization," Analytical Studies Branch Research Paper Series 2002179e, Statistics Canada, Analytical Studies Branch.
  26. Grossman, G.M. & Helpman, E., 1989. "Endogenous Prduct Cycles," Papers 144, Princeton, Woodrow Wilson School - Public and International Affairs.
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