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Trade as an engine of creative destruction: Mexican experience with Chinese competition

journal contribution
posted on 2023-06-08, 12:28 authored by Leonardo Iacovone, Ferdinand Rauch, L. Alan Winters
This paper exploits the surge in Chinese exports from 1994 to 2004 to evaluate the effects of a competition shock from a low wage competitor for producers in an important middle-income country, Mexico. We find that this shock causes selection and reallocation at both firm and product levels and that its impact is highly heterogeneous at the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, whereas those of larger plants and core products seem relatively impervious to the shock. This implies a reallocation in terms of market shares within firms and between firms. We also show that the impact of expanded access to cheaper Chinese intermediate inputs has a similar effect, with larger plants benefiting more from the availability of cheaper imported inputs.

History

Publication status

  • Published

File Version

  • Published version

Journal

Journal of International Economics

ISSN

0022-1996

Publisher

Elsevier

Issue

2

Volume

89

Page range

379-392

Department affiliated with

  • Economics Publications

Notes

Online First Article

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-09-24

First Compliant Deposit (FCD) Date

2013-11-20

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    University of Sussex (Publications)

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