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Chinese competition and network effects on the extensive margin

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  • Daniel Goya

Abstract

I construct a network of input-output linkages in Chilean manufacturing and show that a negative demand shock has an impact on the number of firms producing in sectors that supply the sectors affected by the shock. Approximately one-third of the effect of increased Chinese competition on the extensive margin can be attributed to these network effects. The observed effect is a combination of multiproduct firms dropping varieties and firms leaving the market. I also study whether there is evidence of 'cascading failures' that could amplify the impact of idiosyncratic shocks. I find no evidence of these 'cascading effects'.

Suggested Citation

  • Daniel Goya, 2019. "Chinese competition and network effects on the extensive margin," Working Papers 2019-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
  • Handle: RePEc:ucv:wpaper:2019-01
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    1. Bas, Maria & Paunov, Caroline, 2021. "Disentangling trade reform impacts on firm market and production decisions," European Economic Review, Elsevier, vol. 135(C).

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    More about this item

    Keywords

    production networks; extensive margin; propagation of shocks; input-output; Chinese competition.;
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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